Getting Out of Debt: Stop Paying Interest and Start Earning It

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According to a study by Nerd Wallet, the average American household has $15,310 in credit card debt and $132,086 in household debt. I can attest to this being true;  I myself started my professional career with tons of debt. I had student loans, credit cards and a not-so-smart car loan. When I got married, I had the pleasure of quadrupling my debt. Merging hubby’s debt along with the genius idea of financing a luxury vehicle while starting a new business with credit cards didn't help.  Getting out of debt had to become a priority.

getting out of debt

The one thing I regret about having so much debt is the opportunity cost of having to forgo saving and investing. As you know, time is money when it comes to building a nest egg. If you ever second-guess your decision about getting out of debt, remember this: the more interest you pay, the less interest you can make on your savings balances.

 

Open Account

Higher interest rates on your savings than the national average

There’s no doubt about it, the road to financial freedom is all about earning interest instead of paying interest. Due to PTDD (post-traumatic debt disorder) issues, I’m an extremist when it comes to debt. I have no debt at all: no mortgage, no car note, no credit card debt. Nothing. We live a totally debt-free life and plan to forever more.

We don’t use debt, and guess what? Life is pretty freakin’ awesome for our family! I get to home school my girls and support their budding entertainment careers and we travels tons as a family.

I want this kind of freedom for you, too.

So as you read this article, keep in mind that I'm coming at you from a place of love and not wanting you to live a miserable life. I want you to have the funds and resources to invest more and eventually reach a place of financial freedom.

Note: While there are great resources out there that will tell you to budget, make more money, cut cable and other tactics to eliminate debt, I don’t go into that here. I am focusing on the emotional side of getting out of debt at the moment. Money issues are just as emotional as they are financial.

But no worries, I’ll refer you to some great resources that will give you actionable steps to get out of debt.

Without further ado, let’s go over how to you can prime your brain for debt freedom.

Attitude Adjustments for Getting Out of Debt

Face the Problem

One of the first steps to getting out of debt is admitting you have a problem.

Even though everything might seem okay on the outside, be truthful with yourself.

Does the thought of money give you anxiety?

Are you concerned about making payments or are you chronically behind on payments?

Are you happy with the amount of money you are able to save each month?

These are questions that are designed to cause you discomfort and help you reflect on your money situation. If it turns out you have a debt problem, face it. Own up to it. Lament over it (in a healthy way.) Don’t stay in the place of despair for too long, however. The time is now to take action and fix things.

Get a Plan

The ray of hope came when I found a proven plan. And the best part was, I didn’t have to be super smart or incredibly special to make the plan work. All I had to do was stick to the plan that helped millions of people get out of debt. (In case you are wondering, we used the plan in Dave Ramsey’s, Total Money Makeover.)I remember being depressed about our finances for a long time.Getting out of debt: You’ll have to find manageable combinations of reducing expenses and increasing your income to have a surplus, which can be applied to accelerating debt pay-off. That’s really all it comes down to!

When you get a plan, you’ll get hope along with the ability to actually change your money situation. Now, in this plan you’ll have to do things like tally all your debt, create and stick to a budget, etc. But there will be no mystery as to what to do and when.

I won’t go into the specifics of the plan here, but I’ll give you a hint: spend less than you earn. It doesn’t get simpler than that. You’ll have to find manageable combinations of reducing expenses and increasing your income to have a surplus, which can be applied to accelerating debt pay-off. That’s really all it comes down to!

Related:  How to Get The Most Out of Your Savings Account

Change Your Circle

Have you ever heard the saying, “You are the average of your five closest friends”? This refers to income, net worth and anything else you can think of. I don’t know if anyone has proven this theory with actual numbers, but it’s another take on the idea of “birds of a feather, flock together.” If you are a spender and your friends are spenders, you might need to separate yourself from that spending peer pressure that could prevent you from getting out of debt.

What about friends who constantly complain instead of use creativity to get ahead? If your posse doesn’t help you get ahead, they’ll only keep you down.

Be truthful with yourself about the level of toxicity you might be exposing yourself to and make a choice for financial freedom.

You may not need to totally cut your self off from your beloved acquaintances, but think about changing how you engage with them so that your journey to financial independence is nurtured and not stunted.

Stay Inspired

Once I knew that I wanted our family to get totally out of debt, I began to voraciously consume content that would educate and inspire me to improve my financial outlook.

Though it’s easier to sit on the couch and binge watch old episodes of The Office, I had to come to terms with the new information I would need to see this journey through. The Office is quality entertainment, don’t get me wrong, but it was taking away time that I needed to feed my brain with informative, inspiring content.

I listened to financial podcasts, read financial blogs and books to help me get over the hump many days.

I remember the time our air conditioning unit has been vandalized and we had no central air for the summer. It was one of the hottest summers Chicago had experienced in a while, but we chose not to fix it in order to keep paying off debt.

That summer, I was working from my home as a database consultant at the time in my small, hot office. I wanted to stop working. I wanted to take a nap every single day due to the fatigue and aggravation from the extreme heat.

You know what kept me working through the day so I could get my maximum hourly pay-out? Dave Ramsey’s podcast.

I’d listen to stories of him counseling people to get out of debt. I’d listen to people give testimonials of getting out of debt. Those stories kept me in the game when I wanted to quit so many times.

Maintain Your Support System

Make it your business to find people, groups and content that will keep you in the game when you want to quit. It will help you keep going through the tough times (like when you don’t have A/C in extreme heat.)

Some sites and personalities I like include:

So that’s it. That’s what you need to do to finally start getting out of debt once and for all. If you’d like more information about getting out of debt and increasing your income, check me out over at www.princplesofincrease.com. If you'd like a free copy of my eBook, Get Out of Debt Now, click here.

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Aja McClanahan

Aja McClanahan

Aja McClanahan is a financial writer and blogger who got out of over $120,000 in debt. She now shares her experience and financial insight on her own blog, PrinciplesofIncrease.com, and other web publications.
Aja McClanahan

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5 comments

  1. Nice post Aja. We had to change our circle of friends to an extent when we took hard to our path to financial independence. You can’t “keep up with the Jones'” if you want to retire early (and have jobs that don’t pay that well!)

  2. Hi Aja! I really really wish I’d read this before signing on the dotted line to get our HVAC fixed this summer. I’m mad about it now and have a plan to pay it as quickly as possible with my freelance income however, I needed this little bit of motivation and encouragement. It’s really admirable that you are able to be there for your kids, homeschool them, and help them chase their dreams. I want to be able to do that for my kiddos and I know debt is a hindrance to that plan. It’s time for the hustle to get real because your message is really spurring me on.

  3. Yep I completely agree with this! It’s a domino effect. When I started hanging out people with better financial habits, I started to notice that they tended to hang out like minded people as well! It’s so important to hang around these types of people! It brings a whole new perspective to “Keeping Up With the Jones”!

    1. Definitely! It’s pretty cool because sometimes people actually get envious of what they don’t have. I have friends that are jealous of the fact that my frugality/spending habits allow me to do the thing I want to do, when I want to do them (instead of having to check my bank account to see I have the money to do it).

      It’s an awesome feeling and it rubs off them/I think inspires them to make smarter decisions with their money too.

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