Christmas was 2 months ago and people are feeling the effects of their “festive” spending. And suddenly you start wondering if you’re ever going to end this cycle. If you’ll be doing the same thing again come Christmas this year and never moving forward.
The truth is – you CAN get out of debt – but it DOES take some work. And it DOES require you to have money to pay the debt off.
The most important thing is to work out WHY you are spending what you’re spending and getting into debt and make sure you don’t head back in that direction.
Here is a process you can follow to eliminate your debt. It’s not only about the paying of the debt – there is the energy behind it all – so we approach this from both an energetic and practical perspective.
1. Establish how much you owe.
I know that this probably sounds very obvious. After all, if you don’t know how much you owe, how can you make a plan?
But the truth is, for many people who are in debt, they are too afraid to face the reality and avoid contacting companies that they owe money to, or opening statements that they receive so they can remain in ignorant bliss.
When people do this exercise, they find that the amount that they owe isn’t as much as they thought it would be and they invariably release a huge sigh of relief.
Make a record of your debts:
who you owe money to
how much you owe
the minimum repayment amount
the interest rate they charge on the outstanding balance
how does the debt make you feel emotionally? (0 = not worried about it, 10 = makes you feel sick in the pit of your stomach)
Consciously accept what you owe.
Take full responsibility for the debt. Accept that it was your decision that got you there.
2. Stop the cycle.
What’s really behind the debt?
We can come up with all sorts of stories about why we have this debt – but what is the real truth?
What are the expenses that you’ve incurred that have got you into debt?
What needs are those purchases meeting for you?
What emotions are you trying to stifle?
Give those feelings a voice and tap them out.
3. Forgive Yourself
Forgiveness is one of the most powerful techniques that we have.
Forgive yourself for getting into this situation. For the pain and hardship that you’re currently experiencing as a result of the debt.
Forgiveness is not about forgetting what has happened, but about reclaiming your energy so that you can live your life in a way that is no longer negatively influenced and limited by the issue.
Forgiveness is for your benefit, not the other person’s.
Forgiveness is an act of self love.
The Ho’oponopono is the simplest method of forgiveness that I know of. I love this version:
I’m so sorry for whatever I’ve done to create this situation for myself and for the others here.
Please forgive me for the things I’ve consciously and unconsciously done in this lifetime and others to bring about this situation.
Thank you for your forgiveness.
I love you.
Gratitude is another one of those powerful practices that is life changing.
So what is there to be grateful for about debt?
Well, what did you get for your debt? (Hint: You answered this in number 2 above)
Give thanks for those items, experiences, memories that the debt has given you.
Maybe it is a student loan and it has given you an education.
Or medical expenses and you have restored your health.
Or a family holiday and you have wonderful memories.
Be grateful for the experiences that you gained and if nothing else, for the lessons learnt from going through this exercise and that you won’t go down this route again!
5. How is being in debt serving you?
It’s easy to stay in victim mode and hang onto your stories.
What would your life be like if you didn’t have this debt?
Who would you be without this debt?
Is having this debt keeping your safe?
Allowing you to stay small?
What is it that scares the shit out of you that you’d rather stay in debt then step into the person you’re destined to be?
6. Can you consolidate any of your debts?
I am not a financial adviser. Before doing this, please seek qualified financial advise.
Is it possible to consolidate your debts into one debt and have a lower repayment on the overall debt?
Some people refinance it into their home mortgage which gives them a much lower interest rate. This is great, but the downside is that the repayment period can be a LOT longer – is it worth it?
If you can repay that portion at the lower interest rate over a shorter time period, it may be a viable option.
The other downside is that it frees up your credit cards for spending – what steps will you take to stop you max-ing out your cards again and getting the cycle going again?
7. Determine which debt you’d like to pay off first.
There are many theories about which is the best debt to pay off first.
The simple solution is that the method that resonates with you is the best method!
(a) The debt with the lowest balance
The advantage of this is that you get the satisfaction of paying a debt off quickly.
There is nothing quite like crossing off a debt as fully paid to keep you motivated.
(b) The debt with the highest interest rate
This is the financially logical solution. If you get rid of the debt with the highest interest rate first, you’ll be paying less interest in the long term and you’ll save money. But money isn’t always everything. There’s having a sense of peace for where you are, which leads us to
(c) The debt that causes you the most stress
This is the one that you rated the highest on a scale of 1 to 10 in #1 above.
If you have a debt that makes you feel ill every time you look at it, from an emotional point of view you are better off getting rid of it first. The weight that you’ll feel being lifted off your shoulders once it is paid is immeasurable.
Review your debts again and feel into which one will feel best paying off first. There is no right answer. The answer is to make a decision and start taking action now …
8. Time for action.
Make sure you pay the minimum repayment on ALL your debts. Set up automatic payments if you can. This will help you avoid any late payment fees.
Determine how much of your income you can direct to paying towards your chosen debt in # 7.
Keep paying the minimum repayment and the additional payment on this debt until it is paid off.
CELEBRATE the clearance of the debt. (Make sure you have decided beforehand how to celebrate (and reward yourself) when each debt is paid off. Don’t let your celebrations and reward result in more debt, though!)
This is when the power kicks in.
Take the minimum repayment that you were paying on this now cleared debt, and the additional payment you were making, and allocate them to the second debt you want to pay off.
This is called snowballing. Your overall money going out in debt reduction isn’t changing – you are only increasing the amount payable to each debt over time.
9. Contact creditors.
If you’re getting demands for payment or are way overdue with any payments, it is worthwhile to contact the creditor and explain your situation and how you are remedying it.
In the majority of cases people are happy to work with you as they want to get their money back.
10. How to stay motivated.
Becoming debt free requires some serious mojo and it won’t be all sunshine and roses during this journey.
You will be challenged.
You will have financial demands where you think you cannot make the minimum repayments, let alone the additional repayments.
Stay committed to your plan.
Show the Universe that you are serious. If you fall over at the first hurdle, you’ll never get on top of your debts.
Be realistic with your budgeting. While you may be able to live frugally for extended periods, it’s not much fun and this isn’t about punishing yourself.
Allow yourself some “fun” money. It can be just $ 10 per month. See what you can do with it. Become creative with your entertainment!
Be mindful of your spending. Think if there is a cheaper alternative to what you are doing so that you can pour more money towards your debt – movies at home with your own snacks. Make it a party. Your attitude determines the level of fun you have at any time.
Get rid of any existing store or credit cards and use a cash only basis for spending. You become a lot more aware of your spending when you have physical cash to spend! And it stops the credit card debt cycle.
Be visual with your debt reduction plan. Create graphs that show how your debt is reducing. Colour in flowers to show your progress. Whatever motivates you to keep going!
Create affirmations about your new debt free lifestyle.
Visualise how fantastic you feel being debt free.
Practise EFT for any of those nagging doubts and beliefs that come up during the process.
Have regular reviews of your finances to check your progress.
Brainstorm ways that you can generate additional cash that you can put towards your debt.
Declutter your house and sell any items that you no longer need, or donate them to a good cause.
Declutter your life of activities (and people!) that no longer serve you.
Create space in your life for abundance and prosperity.
Surround yourself with positive people who will support you on your mission!
11. Start saving.
I firmly believe in starting a savings habit NOW.
Yes – BEFORE you are out of debt.
It doesn’t matter how much you save – what’s important is that YOU DO IT!
Creating the habit of savings while paying off debt is essential, otherwise when your debt is all paid off, you run the risk of thinking that those funds are now available for spending.
Those “repayment funds” can now be redirected towards savings and investments. You’ll already have the habit, now all you need to do is increase the amount going towards those funds.
Disclaimer – I am not a financial adviser. This is general advice. Please seek professional advice.
Share with us below your debt reduction experiences!