Climb your way out of debt

What does being in debt mean to you?

Do you avoid having clarity about your finances? Have you decided it’s not possible to live without being in debt, or being worried about debt?

What have you decided it takes to get of debt?

Traditional ‘debt-management’ methods such as budgeting, cost cutting and sacrificing the ‘nonessentials’ may reduce your debt short term, but do not actually change the way you are functioning with money overall, and will not change the fundamental issues that create the debt you are experiencing.

Here are three practical steps that you can take to climb your way out of debt, and take charge of your financial future. These tips apply to your business as well as your life.

Put aside 10% of everything you earn, & don’t spend it, ever.

When money comes in to your life, where do you allocate it first? Do you pay off bills? Loans? Credit cards?

Whatever you put your money and attention on, you create more of. If you assign your money to your bills and debts first, you will create more bills and debts. If you are willing to honour yourself first, before paying anyone else, you are making the commitment that you will have money no matter what, and this commitment will begin to change your relationship with money dynamically.

Whatever you put your money and attention on, you create more of. If you assign your money to your bills and debts first, you will create more bills and debts.

Make sure to put 10% of the gross of all money that comes into you, as an honouring of you. You can keep it in a bank account or in cash. You can also keep it in liquid items that will increase in value over time, such as gold or silver, if that would be fun for you.

Your 10% account is not a ‘rainy day’ or emergency account. If you treat the account like that, you will almost certainly create the rainy day or emergency to spend it on!

If you are one of those people who value spending money over having money, you may also want to keep an amount of cash in your wallet that you think a rich person would carry. Keep it on you and don’t spend it, and notice how it feels to know you always have money in your life.

Work out exactly how much you owe, & make a commitment to pay it off

If you would like to become debt-free in your life, you need to have total clarity on exactly the amount of money you owe.

Once you know the total amount, work out how much you would have to pay per month to have it fully paid off in two years. If you have more than $40,000 in debt, you can pay it off in four years, or more.

What would you have to do to ensure that you could pay that off each month?

And what if it wasn’t about cutting costs? What if you would ask questions like what would it take to increase your income? What revenue streams could you add to your life?

Instead of looking to what you have to limit to create more money in your life and business, ask the questions that would invite more possibilities and open more doors.

Know exactly how much it costs you to live a life you enjoy

Work out exactly what it costs you to live each month.

Include essential costs such as rent or mortgage, car, food, electricity, phone and internet expenses, and your debt repayments. Also, add the amount of money you would need to do the things you enjoy, like classes, courses, hobbies, dining out, clothes and vacations.

Add the 10% for your honouring account, then add another 20% for miscellaneous expenses.

To have the future you would really like, you need to know how much you require to live the way you would like, or you will not be able to make accurate financial targets.

What if coming out of debt was not just about paying off the money you owe, but creating a financial future where you get to thrive instead of just survive?

Simone Milasas, Founder, Joy of Business