These tips will change how you perceive debt, but what really stops us? Getting out of debt is easier said than done. Usually, there doesn’t come a time when our liability officially stops. So this article will give you tips on how to alleviate the load when it comes to your financial burdens.
Why would you care? I get it, no one wants to pay debts but, by paying off your debt, you’re freeing up more of the most powerful tool you have, your income.
I’m not talking about the money you owe but the interest you’ll have to pay. Debt seems small until time is added to it. The law of compounding shows us that time can magnify anything. If you are struggling with debt, ask yourself if your approach is holding you back. Insanity is described as doing the same thing over and over and expecting a different result.
In life, we tackle problems with the same tools or equations. Rather than change the tool we change the problem. Maybe the problem is the tools altogether. Each of us has a toolbox, and these tools were ones we picked up, ones that were given to us, and the ones we create. What tools are you using?
How do you pay off debt?
Do you pay off the highest interest rate? The lowest interest rate? Which would make sense mathematically? Which strategy would save you money? These are all critical questions, but in reality, there is only one answer to, “What is the best way to pay off debt?”
Rosa would say to pay it off as quickly as you can. If you can reduce the amount of time it takes for you to pay that debt, you will be reducing the interest you’re paying saving you more money.
Create a plan for tackling your debt, give yourself limits and constraints. Because the human mind works great under pressure. When given 8 hours to finish a job, the job will take us 8 hours. But if our time is limited and we have only 4 hours to complete the same job, we will get it done.
This is the trickiness behind the human mind. If you give yourself a year to pay off all of your debt, you will complete it. But if you give yourself ten years, it will take you ten years to pay it off your debt completely.
Stop taking bad advice
In the digital world, it’s worth getting a second opinion from Google. The cost of bad advice is more than the time it would for you to research the information yourself.
If you’re taking advice from someone who is not in the financial situation you want to be in, then stop. You wouldn’t take fitness advice from a trainer who was out of shape. In our past information helped us, it was how we survived. Today information is everywhere, there’s information embedded with information.
Three tips to help you change how you perceive debt
Use the process of elimination to identify habits that are increasing your debt. By removing these habits you will surely free up income that was always there.
Make it harder to spend
The first tip is to make it harder to spend. If the goal is to eliminate debt, then we need to identify what’s stopping us. Well if we spend less, we can pay off our liabilities faster. It’s easier said than done, but what you can do is make it harder for you to spend.
If you have credit cards, put them in water and freeze them in a block of ice. Cut them up and shred the pieces.
These are drastic measures, but the standards are for you because it’s easy to spend what you have we need to reverse that role.
Direct your income to a separate account that you cannot readily access.
The majority of the time, spending is more behavioral than necessity. It’s vital to understand your behavior when the world around you is continually sending you information.
Stop your boat from sinking
The second tip is to stop your boat from sinking. To stop your boat from sinking, you need to fill in any holes that are causing you to sink. Read that again. Currently, there are items you’re paying for that you no longer use. You must be honest with yourself because if you’re not, you’ll go down with the ship.
I love having Hulu, Netflix, HBO, Crunchyroll, and Amazon Prime. How are those helping me reach my financial goals? Realistically no one has time to watch all of these, and if you’re like me, you have a favorite.
The struggle of having shows on multiple networks is a first world problem. It might be a real problem. However, again, this is about honesty. If you honestly watch all of these networks, your boat might be sinking in other areas.
When I looked at where I honestly spent my time, I canceled all but one. Which do you think I kept?
Start preventative maintenance early and make it a habit
The third tip is to stay proactive. When I first bought a car, no one taught me about preventative maintenance. I didn’t have a father figure to guide me on the basics of automotive care. After a month and a half, my car started making noises, the kind that makes you think about money.
It wasn’t until my Mom asked me when my last oil change was that it hit me. I didn’t do any preventative maintenance.
Preventative maintenance helps while the equipment is still working so that it doesn’t break down unexpectedly. The earlier you start, the bigger your reward.
You’re not a car. You’re much more complicated. If you’ve never performed any form of self-care, then today is a good time to start. It’s only too late when we’re gone entirely, otherwise, time is still your asset.
Start eating healthy, slowly build a workout plan, and invite positive energy into your life.
Without preventative maintenance, small problems become big problems. Your health is a costly problem.
Change your narrative around money
The first step to getting out of debt is deciding that it’s time.
If these steps have eluded you, then it’s time to change your narrative around money.
If you’ve already decided then congratulations, you’ll circle back to this step.
What you know could save your life or build you a fortune.
What you don’t know could cost you.
Both are equally important.
Usually, when one narrative is false, it’s been surrounded by other fake stories. Lies built on lies, what lies were you told about money? I don’t know that answer, only you do.
Let’s circle some essential facts about money. If you make $34,000 a year, you are in the top 1% of the world. The global average income is a little over $1,000 a year.
In the United States, the average income is $55,000 a year. Which means we have more income opportunity than most of the world.
How to keep your business out of debt
Keeping your business out of debt is more proactive than reactive. A business takes on debt for a number of reasons but by following some of these key things, you can keep your business out of debt. If you have cash flow problems, this article will help you.
The 7 Ps of planning
The first time the 7 Ps of planning was introduced to me, I was ecstatic. I shared it with those closest to me, whom I knew would share my enthusiasm.
I heard it in the military, and it stuck with me ever since. Proper prior planning prevents painfully poor production, yes you read that right.
We learned it as part of another leadership lesson in responsibility.
If you do not have a plan to spend your money, your mood will take advantage of you. You are the most convincing person in the world when it comes to yourself.
If your money took time to earn, it should take time to spend. Think about how easy it is to spend money.
It would be best if you planned for your spending. I’m not suggesting to stop all spending but to account for whatever moves between your accounts.
When you shop at the grocery store, create a list, give yourself a budget, and stick to the necessities.
Instead of going out to eat or grabbing a cup of coffee, find creative ways to save your money instead of spending it.
Above the line
All debt consolidation is focused on below the line changes. The ‘line’ is what separates your expenses from your income. Sometimes you’ve built such a specific lifestyle that reducing the amount of money you spend isn’t an option.
If below the line won’t help you, then it’s time to look at increasing your income. I wrote an article on how to change your lifestyle. You can read it here. Leave us a comment if you enjoy the article.
If you’re unable to add additional revenue streams, then you might have a limiting belief that’s stopping you. Still, if you can’t bring in more, what can you do with what you have?
Money is a tool, just like other tools. The goal is to figure out how to be resourceful, with or without money.
You can speak with one of our financial architects, to help you work with what you have.
Be your own accountant
Becoming your own accountant seems silly but if you have someone to hold you accountable, you’re more likely to stick with change.
The American Society of Training and found that with an accountability buddy, someone is 65 percent more likely to meet their goal. If the meetings are regular, the percentage increases to 95. Holding yourself accountable to meet your goals is the difference between success and failure.
Let’s look at some things you can do to become your own accountant.
Account payable management
Managing your accounts payable will help you avoid any unnecessary fees. Account payables is a business term for debt, it’s money you owe. If you constantly owe money on your accounts payable, you’ll want to focus on paying your debts on time.
Credit allows us to borrow so we can pay at a later time but in business it can often do more than just create late fees. Money is a communication tool that businesses use to exchange value. When communication is impacted it can affect any relationship.
When you manage your account payables, you’ll never miss a payment. You’ll never incur late fees, and you create the habit of someone who pays what is owed. It’s not what you did right that people remember the most, it’s what you did wrong that they will never forget. In business managing your accounts is managing your relationships.
Account receivable management
Managing your accounts receivable will help you collect your business payments on time. Account receivable is money owed to you. If money isn’t collected on time it could impact other parts of your business.
Accounts receivable are best managed when attended to immediately. Payment is collected when the service is completed. Keeping it simple, keeps your accounts simple.
Keep your accounts separate
If you keep your personal and business accounts separate you are less likely to get audited. There is less of a likelihood of you making a mistake. The more meticulous you are when handling your finances, the more you will avoid debt.
Like a weightlifter that eats healthy, you’re putting the work into your business. You’re watching the profit or loss and all the little details your account watches. When you create an environment where your finances have become important to you.
Hold a weekly meeting with yourself
Humans are brilliant creatures but we need to be reminded of what’s important sometimes. It’s not instruction that we seek, we know the answers but we need to ask the questions. If you hold a weekly meeting with yourself, you give yourself the opportunity to remind yourself of what’s important.
What results are expected of you and are you moving towards those results?
It’s easy to get caught planning, learning, studying, or growing but at the end of the day there are a few things you need to focus on for your business. Focus on those.
The weekly meetings are like the sail of a ship, just meant to keep you on course.
Once you’ve decided to eliminate debt, you can decide on different strategies to build wealth. It’s not that we aren’t making enough, most of the time it’s where we are directing our money. Debt is more about our spending and saving habits than it is about debt. Debt was just a symptom of our actions.
The tools you use will help or hinder you. You can have the right systems but if it has the wrong people, it won’t work. The same time, the right people will never work in the wrong systems.
Either way, debt can hold us back. If you need help tackling your debt we can help restructure the way you see it.