TIPS FOR REDUCING
AND ELIMINATING DEBT

You can't start creating wealth unless you also start eliminating debt. Don't think of it as taking a step backwards. You are actually moving forward by getting rid of debt and setting a positive financial example to your children.

Are you ready? Get out a piece of paper and a pen...

STEP 1 - FIGURE OUT HOW MUCH YOU OWE -
Surprisingly, most people don't have a clear picture of how much they owe and who they owe it to. Eliminating debt is impossible until you know how much is owing and to whom.

STEP 2 - GATHER ALL YOUR BILLS TOGETHER AND MAKE A LIST OF ALL THE DEBTS YOU HAVE -
-Write down the name of the creditor,
-how much your total balance is,
-the minimum payment you owe monthly,
-and the interest rate you're paying to that creditor.

STEP 3 - STOP ADDING TO YOUR DEBT -
Do you have maxed out credit cards? Cut them up. You should have no more than one credit card. No department store credit cards, gas cards etc. You are only going to use your one credit card for necessities from now on.

Remember, credit card companies want you to remain in debt, they aren't interested in you eliminating debt - to the contrary! They want you to pay the minimum payment on your credit card every month for the rest of your life!

In order for them to have a successful business and for them to keep creating wealth for themselves, they need you to spend, spend, spend, and owe, owe, owe. And off to the bank they go!

Call your credit card companies and ask them for help. They probably won't erase what you owe them, but they might be willingto reduce the interest rate you're currently paying. Ask them if they would consider cutting the rate in half.

If they sense that you might be ready to default on your loan to them, they would rather offer a lower rate to you and get their principal back, than get nothing at all.

Note: A good card to have is a debit card from your bank. This still gives you the convenience of a card, but the money isdeducted from your account, thus avoiding debt. This is the second best thing to cash.

STEP 4 - USE CASH AS MUCH AS POSSIBLE -
You'll think twice before buying something if it's bought with cash. Physically taking money out of your wallet and paying makes you feel like you're spending more money. You'll end up spending less which in turn will result in you saving money!

STEP 5 - WRITE DOWN WHAT YOU SPEND -
This is an annoying step, but is key to you eliminating debt. For the next month or two, write down every cent you spend, big or small.

If you're like most people, your debt didn't come from a one-time huge purchase, but from little bits of spending that piled up over time. Knowing what you are spending your money on is key to avoiding more debt.

One thing that helped me was putting my spending into categories:

*Must Haves
- Food, Mortgage/Rent, Medicine etc.,

*Should Haves
- New Clothes, Gym Membership, Hair Cut etc.,

*Like To Haves
- Starbucks, Magazine Subscriptions, Personal Trainer, Facials etc.,

Write down the amount you spend (per month) in each category.

By writing all this down, you'll probably figure out where you can cut back on your spending. Take a look at the must haves and the should haves first, and see what you can eliminate.

Don't think that you have to come up with a budget that is unlivable. You have to be realistic so that it will be easy to continue with your plan of eliminating debt.

For example, I had a gym membership that automatically came off my credit card monthly, but I didn't step foot in that gym for a year and a half (am I stupid or what)! Just by canceling my membership, it added $50 a month, or $600 a year to my eliminating debt and creating wealth plan.

What about your three or four dollar coffee you get before work? Can that be cut down to two or three coffees a week instead of six or seven?

You don't have to deprive yourself completely, just think about different ways to reduce your spending. You'll be amazed at how much money is spent on things we can easily do without.

STEP 6 - PAY YOURSELF FIRST! -
Always pay yourself first, even if you're in debt! You can refer to my
Paying Yourself First page, where I explain how to set this up automatically. Many people put their creditors first and themselves last.

Set aside something, anything, towards your goal of creating wealth, even if it's five percent of your earnings per month. It will be a crucial step towards creating wealth and freedom for you and your family.

STEP 7 - START PAYING OFF YOUR DEBT -
If you've done the previous step for a month or two and have figured out what items you will be cutting out or cutting back on, you should now have a dollar amount that you can put towards your eliminating debt program.

If you have debts that are past due, or the creditors are calling your house about a certain bill, get rid of these debts first.

If you have several credit cards, pay off the one that has the least amount of debt on it. I know this sounds wrong, but if you have a card with $500 owing, and one with $5000 owing, paying off the smaller one will take less time to pay off and make you feel like you've really accomplished something.

It will boost your confidence and make you want to continue paying off your debts and continue on your road to creating wealth.

Keep eliminating your cards, from the least to the most, until you only have one card left. Cut up the cards as you pay them off.

(Just a note of warning: By all means cut your cards up, but carefully choose which cards you cancel, as closing some credit card accounts may actually lower your credit score. Call the credit bureau before you close out an account.)

By the way, you're allowed a free credit report every year (Equifax, TransUnion are a couple...). It's really important to know your credit rating as this may affect you being able to buy a house or get a loan in the future.

STEP 8 - CAN YOU EARN MORE MONEY? -
Maybe you have a skill or hobby from which you could earn some extra income. If you have your goal of eliminating debt in mind, most people can figure out a way to bring in some more income that's relatively painless.

This money could be put directly towards your debt, and could even build an entirely new and exciting income stream for you over time. Having a website is an example of something that could do just that! If this is something that interests you, click here.

STEP 9 - KEEP GOING, DON'T GIVE UP! -
Once you've figured out what you spend your money on, what debts you owe, what things you can cut back on and put towards your debt repayment and creating wealth program, it will get easier. After seeing your progress, you will have a real sense of purpose and see the light at the end of the tunnel.

Just continue to pay off your debts and knock them off your prioritized list. You didn't get into debt overnight, and so you won't get out of debt overnight either. Learning to manage your money will give you less anxiety and great peace of mind.

And knowing that you're paying yourself first puts you in the creating wealth path, so you'll even walk with a spring in your step... really!