11 Essential Steps to Demolish Over $160,000 of Debt in 3 Years
On January 1, 2016, I got serious and decided to embark on my debt freedom journey in order to experience living a life of financial abundance and financial freedom. Since then, I have been tracking my debt payoff progress on a weekly basis and realized I had paid off $27,745.63 of debt within 7 1/2 months, $47,310.24 of debt within 12 months, $93,507.53 of debt within 24 months, $103,341.51 of debt within 27 months, $151,802.99 of debt within 36 months (3 years), and $160,365.55 of debt within 39 months (as of March 31, 2019) all while managing two households! While sharing my successes along the way, so many have asked, "How did you do it?" I shared my steps with those who have asked, but I believe there are more people in the world who can benefit from the steps I have taken and still continue to execute to this day.
Here are the essential 11 steps I executed to single-handedly pay off over $160,000 of debt in just 3 years and 3 months while being a caregiver:
1. Gain Knowledge from Financial Platforms
I began listening to financial podcasts to gain insight and help change my mindset on spending habits and the debt cycle. Listening to The His & Her Money Show podcast immediately gave me the initial momentum to get started on my debt-freedom journey. The hosts of the show (Talaat & Tai) interview hundreds of people who have paid off large amounts of debt and are currently living debt-free (or very close to being completely deft-free). I also started my YouTube Channel, Sophia Melonē, as a means to share tips and insight on how to better your personal finances. I recommend surrounding yourself with knowledge from those who have done it! Be willing to change your mindset, take action, and do your best to stick to your plan.
2. Face the Reality of Your Situation
I outlined all of my debts and ordered them from smallest to largest. I had to face the reality of my situation and tally all of my total outstanding debt obligations. I always tell my clients this statement, "You can't know how to start if you don't know where to start." For each debt, I referenced the outstanding balance as of December 2015 and included the interest rate associated with the debt. This allowed me to gauge exactly how much debt was required to pay off. It was not easy looking at the large number, but it gave me more incentive not to incur any additional debt and to pay off my existing debt as soon as possible.
3. Identify Your Income & Expense Patterns
I outlined all of my monthly expenses and income to see where my money was going. This is a very important step because it will introduce the development of your monthly budget, which is the next step. Reviewing your financial activity over a 3-month timespan is a great starting point. In order to really see your financial patterns, you will need to gather sufficient data. Take the time to go over your bank transactions (including credit card transactions) and categorize your spending. You will be surprised to see where your money went.
4. Establish & Operate from a Budget
I established a strict budget by taking all measures to reduce monthly expenses or eliminate expenses in its entirety. You have to tell your money where to go! I called my phone, cable, and security alarm service providers to get reductions on my monthly bills. I changed my service plans, removed unused monthly services, cancelled nonessential services, and researched other companies where I could get my needed services at a lower rate. All of these reductions add up. Every little bit counts!
5. Put a Halt to Credit Card Usage
I stopped using my credit cards and established a cash budget for all purchases (groceries, gas, miscellaneous items). This was very tough in the beginning because I reverted back to using the credit card with the thought process that I would only spend a certain amount. That tactic did not always work because I would end up overspending (or overcharging). I noticed that strictly using cash will force you to stay within your allotted budget. Incorporate the cash envelope system suggested by Dave Ramsey, author of The Total Money Makeover and Financial Peace University.
6. Increase Your Income
I found ways to increase my income by changing jobs for promotions, starting freelance opportunities based on my talents, finding items in my home to sell, becoming a Lyft driver, etc. The point is: Get a side hustle! I started a résumé consulting business as well as a tax preparation service business as a means to earn some extra cash. Just by doing those two businesses alone on the side, I earned a whopping $2,000 within a few months. I utilized my talents to earn additional income and sold old bridesmaid dresses, purses, shoes, etc. on sites such as eBay, LetGo, Amazon, etc. Having multiple streams of income is a MUST during this Debt Demolition Game!
7. Perform a Recurring Expense Scrub
I analyzed and squeezed my budget on a monthly basis to free up money and applied that money to my debts. Even if only $1 is freed up, apply it to your debt to ensure consistency in implementing this step. I will say it again - every little bit counts!
8. Conserve Energy to Lower Utilities
I conserved, conserved, and conserved energy! I unplugged every unused item in my home (reclining sofas, lamps, microwave, TVs, stereos, DVD players, device chargers, printer, fax machines, etc.), turned off lights when not in use, turned off the water while brushing my teeth and lathering during showers, stopped using the dishwasher, etc. I paid very close attention to running water and minimized usage at all costs. I did all of these things to keep the utility bills down. The process works! To prove it, my lowest electricity bill was $13.10 one month. How would you feel if you received an electricity bill for $13.10 versus $131.00? Every little bit helps!
9. Learn to Say No
I said "NO" to invites that required me to spend money. I also stopped spending money on gifts for every person and every occasion. This was tough for me because I am a natural giver. In hindsight, I realized it was drastically increasing my credit card bills, so I had to put an end to it. Give what you can WHEN you truly can – bottom line. I released an episode on my YouTube channel sharing some cost effective gift giving ideas (click here to watch) that can help in this area.
10. Become a Minimalist and Cut Back
I cut back on beauty spending (hair/nails/pedicures) and tremendously cut back on eating out. I stopped getting manicures and pedicures at the nail salon every two weeks, and I stopped getting my hair done at the hair salon every three weeks. I turned into a Do It Yourself (DIY) girl. YouTube became my best resource to learn how to do protective styles on my own. I also incorporated meal planning and packed my breakfast and lunch during the workweek. This saved a TON of money. On average I was spending $25 per day on breakfast and lunch at work. This is $500 a month that I was wasting on convenience meals. I was really upset with myself when I completed Step 3 and realized I was spending so much money on eating out. Word of advice…CUT IT OUT! Meal planning will save you lots of money and is healthier for you in the long run.
11. Pay Your Tithes & Give Offerings
Last but certainly not least, I stayed faithful in paying my tithes first and giving offerings (when feasibly possible). It is imperative to give unto the Lord your firstfruits, and give it with a cheerful heart! God will open up more doors than you can imagine just by being faithful over the little and obedient to His word. Tithing is extremely important in this process because it aids in building financial discipline; and discipline is the biggest problem most people have difficulty exercising. My motto is “Tithe Your Way to Financial Prosperity.” You also have to be obedient to His Spirit. When the Lord puts it on my heart to give to someone financially, I do it with no hesitation because I want to obey Him and act when God speaks.
Did This Help?
I hope these tips will give you the jump start you need to begin your debt freedom journey or get you further along in your journey. If you have any questions or need help outlining your debts or developing a budget, feel free to contact me AND also check out the Know Your Numbers and Plan Your Numbers episodes of the Sophia Melonē Show on YouTube.
And one more thing…let's spread the knowledge! Please share this blog post with a friend, colleague, or family member and leave a comment below if this blog has helped you in any way.
Remember...Your Financial Prosperity Awaits You!
Sophia Melonē, The Debt Demolisher™️
ABOUT THE AUTHOR:
Sophia Melonē is a Certified Financial Education Instructor (CFEI), Personal Finance Speaker, Facilitator, and Financial Prosperity Coach/Advocate who is extremely dedicated to the financial success of families and households across the globe. Her mission is to make debt freedom the New Norm and Wealth Building the natural nature of habit. Sophia is the founder of SMASH Debt, Inc., which is a woman-owned small business corporation that emphasizes leadership in the personal finances of households. Through the facilitation services and coaching programs offered by SMASH Debt®️, Sophia helps individuals cultivate healthy relationships with their money and shows six-figure income earners how to get their bank account to match their salary and sustain it. Visit www.smashdebtinc.com for more information. #SophiaMelonē™️ #TheDebtDemolisher™️