Getting Out Of Debt Is About The Mind NOT The Money

This post was inspired by The Gradual Shift, written by Trent at The Simple Dollar. I think that many people think they cannot get out of debt because they simply do not have the finances available, instead of thinking about making the mental change that will help them to find the money.

I know that when I first started blogging and looking at ways to save money so that I could pay my credit cards, I thought I would never be able to get there on my small teacher’s salary. I had a lot of debts ranging from my student loan to my car to my credit cards that it seemed I was just paying and paying and nothing was happening.

I went on in this crazy mindset for a few years….and then I discovered the world of Personal Finance blogging. Although I have always followed a budget and ALWAYS paid all my bills on time I was really struggling with having enough money to eat. At one time in college I even returned my vacuum cleaner to get cash to buy bread. Sad, I know, but it was what I felt I needed to do at the time.

image from http://www.soulculture.co.uk/features/scarticles/almost-famous-by-preach-jacobs-overdraft-fees/

When I started blogging and posting my spending I began to REALLY focus on my income and my expenses. I created a zero based budget and started to apply the snowball method to getting rid of my debts. I tracked all my spending and income on an Excel spreadsheet and later moved to Google docs so that I could have access to it from anywhere.

I picked one credit card that did not carry a balance but which would earn me cash back on purchases. I put every bill I could think of on that card and then put all my purchases on it as well. I used ING to pay the credit card so that I would never have late payments or even have to think about when the payment would be due.

Over time, these strategies paid off and I have significantly less debt than I did before and I keep tweaking my budget so that I can cut expenses. I started to pay the minimum (well slightly above the minimum) on all my debts and then send any extra money over to one targeted debt as a form of the debt payoff snowball. After this, I sent any extra money to that debt as well in the form of snowflakes so that I could get rid of that debt even faster.

I actually used different versions of the debt snowball method at different times as I started with the smallest debt first and then when that was paid off I moved on to the highest interest debt….then switched again. Most people argue over which is the true snowball but I think the essence of the snowball is that you pay the minimum on everything except ONE debt and pay extra on that one target. When the target is paid off then you apply what you were paying plus any extra to a different target until that one gone too.

I think that you can choose smallest debt or highest interest first as long as you pick one thing and stick to it. I chose to change my snowball the second time around but that was for personal reasons and that is the great thing about personal finance…you tailor it to fit YOUR circumstances and do what works for you.

My salary has not increased significantly but I have made a huge dent in my debt and all through changing my MIND and making my money work for me instead of crying about what my money cannot do for me.

So today I urge you to Ask not what a dollar can do for you but what you CAN do with a dollar.

Author: Lulu

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11 Comments

  1. well said – I think the same snowball method is taught in John Cummuta’s Transforming Debt into Wealth course. I could have just learned it here from your blog!

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  2. The right attitude is absolutely essential! That will keep you motivated for paying off your debts and staying out of debt thereafter. Thinking you can’t pay off a bill will ultimately affect your spending habits (example: you will spend more carelessly because you don’t think that amount of money will be able to help you pay off the bill anyway).Money can go a long way. Look that lady featured on Yahoo news who bought 3 $60 stocks in Abbott and died a multimillionaire.

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  3. Hello, I am full agree to you. The right attitude is very important.

    I change my mind just a one month ago, and I am very surprised about money I can put in my debt!

    Now I have a budget, I live on cash only, in jars (I watch all show by Gail Vaz-Oxlade on Slice channel) and I am very happy to tell, I want eliminate all of my debt in 2 years!

    sorry for my bad english, my first language is frenc
    La Fourmi magique

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  4. A lot of times, though, getting out of debt may be very difficult. You may have difficulties finding another job or your workplace may cut back your hours permanently. And sometimes, even if you do resolve the problem and you earn more money again, the debt may not be as easy to pay off as you thought.
    The best way to get out of debt is to ensure you keep paying your bills and loans every month and on time. Do not think about how long it is going to take you. Just set aside a budget to pay off your debt every month.

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  5. It’s great to see a success story and how blogging helped you in achieving your goals at eliminating debt. It’s certainly commendable and I’m sure a lot of people can learn from your experiences in telling your story.
    Nice post!

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  6. I am actually in the situation where I really wanted to find a solution on how manage my finances to pay off my debt. I’m currently trying the zero based budgeting and hopefully it will work for me. I wanted to try what you did though I don’t do blogging (I just read a lot), I know there are other ways to monitor and stay focused on what I need to do. Thanks for sharing your experience.

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  7. I technique I used to pay off some of my debts is to lessen my habit of buying things I really dont need…because thats what really lead me into debt anyway. Before I purchase, anything I think twice, even thrice, if I actually need it…it takes a lot of discipline but it works for me. I am able to save up money to pay off my credit card bills and my bills actually lessen.

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  8. Totally agree… the first step of getting out of debt is actually WANTING to!

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  9. Well put! I am at present getting ready to move to a small town by the coast, where the rent is cheap and all my stuff is within walking distance. For me it is also a matter of seeing what I truly can do with a dollar, and so far it is working just great for me!

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  10. Ok, I am about 4,000 dollars in debt right now and I need help getting out of it immediately. It’s not all credit card debt, one debt is a overdraft reserve line ($1,800) one is a missed payment that lead to cancellation of AT&T phone lines with multiple lines ($950) by USBANK checking account, an unauthorized transaction went through, then when i filed a report during the 45 day process of investigation the overdrawing grew to ($1,000) and my Chase Checking got overdrawn by my auto insurance ($250).

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