When Going Cheap Is a Bad Idea

I still remember the moment when I realized I was starting to cross the line from frugal to cheap.

I was pumping gas into my vehicle after buying groceries for my family, which is normal, right? The problem is that I had driven about five miles out of my way to get slightly cheaper gas. While I was getting out to pump gas, a friend of mine called and asked me if I wanted to go to a pub trivia night at a bar that charged quite a bit for drinks and snacks. I thought about the cost and turned him down.

As I stood there, I realized that I had just driven halfway across town to save maybe $2 on gas, while at the same time I had declined to spend an evening with a friend that would have cost me $20 at most. Did I value $2 more than the time I spent driving over here? Did I value $20 more than an evening with a friend, particularly one who was often willing to have potluck dinners with us?

I wasn’t being frugal. I was being cheap.

In this article

Frugal versus cheap

While the difference between being frugal and cheap might be intuitive, it’s useful to nail down what each of those things are and what the difference is.

Frugality is simply being economical or efficient with your money. When you’re being frugal, you’re attempting to continue to have high-quality outcomes, but you’re trying to do so with less expense. Installing energy-efficient appliances is frugal. Making meals for yourself at home when you’re eating with just your immediate family is frugal. Adopting daily habits that bring the joy with less expense is frugal.

Cheapness happens when that drive to be economical or efficient with your money starts to result in negative outcomes for other things you care about in your life. Cheapness happens when your drive to save starts impacting friendships or causing you time management stress. Cheapness happens when cost-cutting makes normal things harder to do and you’re not happy about that difficulty change.

Frugality is wonderful. It’s a financial tool every one of us has within our grasp to help us achieve financial goals, both short term and long term.

Cheapness is not wonderful. When we pay the cost of spending less money by sacrificing our time, our relationships and our mental well-being, we simply pay too much in terms of a healthy all-around life.

Be frugal. Don’t be cheap.

How going ‘cheap’ can cost you

Saying a hard ‘no’ to friends can damage friendships

A good friendship incorporates balance. Sometimes, you’ll do things that you choose, and those can be frugal. Sometimes, you’ll do things your friend chooses, and that might be expensive. Don’t just say “no” when they suggest expensive things if they’re saying “yes” when you suggest frugal things.

For example, one of my oldest friends loves going on hikes and playing board games – both very frugal activities, but also has a taste for going out for fancy meals. There’s a balance there. On the whole, hanging out with him is rather inexpensive, even if there are expensive moments.

If you’re finding that a friendship is “expensive” because it always centers around expensive things, suggest some less expensive things as a counterbalance. Your friend might surprisingly enjoy it. Furthermore, you’ll discover whether this person is a friend who enjoys your company or an acquaintance who just enjoys the activity. It may be a true friendship, or just a friendship of utility or pleasure.

Scrimping can harm relationships

This doesn’t mean you should always spend, spend, spend with other people. Rather, it means that there needs to be a healthy balance between minimizing costs and maximizing fun, and if you’re going to err, err occasionally on the side of fun.

For example, having a potluck dinner party is great, but don’t serve the cheapest main dish you can think of. Instead, come up with something people will genuinely enjoy. You don’t have to go high-end, but prepare something delicious and crowd-pleasing with good ingredients.

Your guests will feel loved and welcome and you’re still being frugal.

Spending lots of time for a little money can cause stress

One temptation that crosses the line from frugality into cheapness is the desire to invest lots of time and energy into something that doesn’t save a lot of time and money. In general, if you’re investing time into a frugal project that’s not bringing you other kinds of joy and you’re not saving significant money per hour of time invested, it’s probably not worth doing. This is particularly true when you’re starting to feel stressed about not having enough time for important things in your life.

An example of a frugal activity that can have rapidly diminishing returns is couponing. In general, the time investment in couponing versus simply planning meals around what’s on sale and buying store brands isn’t a great bargain. Having said that, there is definitely a “game” to be played with couponing, and that game is enjoyable to some. If that’s you, then by all means treat it as a recreational activity that happens to save you a little money.

It’s great to find inexpensive hobbies or even hobbies that can save you money, but those things are hobbies first and foremost. It’s OK to drop time-consuming frugality that isn’t a hobby for you.

Go for the big wins

When you’re trying to cut spending, it can be easy to get fixated on small gains, particularly if they’re frequently repeated. If you can cut back a quarter a day in spending with little effort and no lasting drawbacks, that’s going to add up.

Where this can cross the line into cheapness is when you find yourself worrying about smaller and smaller gains, particularly one-time gains. Don’t worry about the decision to toss a $1 item and replace it with something better. The stress over that decision is more costly than the dollar.

If you find yourself worrying about little expenses, think about the actual size of the savings and how much time you’d have to invest to get that savings, and ask yourself honestly if it’s worth it. If you’re stressing over a small savings, or even a moderately sized one with a time investment, just let it go. Think about the big wins, and don’t sweat the small ones.

Use frugality to achieve your goals 

Most people use frugality as a tool to achieve their life goals, things like paying off debt or saving for retirement. Those things are empowering.

However, don’t lose sight of why you want those goals. Things like a nice home or debt freedom or a secure retirement are intended to bring you joy and contentment. Being cheap often brings stress, damaged relationships and negative health impacts — the opposite of joy and contentment.

If a frugal choice does not feel like a clear “win,” don’t do it. If it’s introducing enough drawbacks that you feel stressed, that you’re negatively impacting a relationship, or that you feel worried and preoccupied, it’s not worth it, particularly when it’s only producing a tiny step toward your goal.

Another tip: Frugality isn’t helpful in and of itself. While saving money is always great, if you’re simply spending it on something else that’s nonessential, you’re not getting ahead. Frugality should help you achieve your goals. Keep track of what you’re actually saving by being frugal, then automate your savings. Set up an automatic transfer into an emergency fund in an online savings account or bump up your automatic retirement contributions.

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

Dave Ramsey’s Financial Peace University™ – Program Review

My wife and I were just asked by some friends at church if we would help them in hosting a Dave Ramsey Financial Peace University™ class at our church.

They had been planning to teach the class by themselves, but in the wake of our tough economic times they had over 60 people sign up for the class.

They decided they were going to need several other couples to co-host the group, and they asked us to be one of them.

We agreed to do our best to help facilitate the class.

Quick Navigation

Financial Peace Revisited“. It’s a great book for debt reduction, with plenty of insight and motivation. The program also has you read from the book each week during the class.

Dave Ramsey's Financial Peace University

Starting The Class: Reviewing Where You Are, Relationships

When you attend the class for the first few weeks, it’s apparent that the focus starting out is going to be on setting a baseline framework from which to work for the rest of the weeks.

Before fixing your problems with debt, it’s important to know why you got into debt, talk about how you and your spouse relate about money – and how that may be different, and then look at how you can set up a framework to make changes going forward.

The class starts out looking at saving up an emergency fund to give you a nice base to work off of so that you don’t continue going into debt if some “emergency” were to happen. It also talks about setting up a larger emergency fund of 3-6 months once you’re out of debt.

Next the class looks at money in marriage, how our money affects relationships and how different people have different outlooks on money. They explore how that needs to be accounted for through having monthly budget meetings where finances are discussed.

Setting Up A Plan For Your Money

After communication about money is established the class dives into the important topics of cash flow planning and budgeting for your family.

It stresses the importance of assigning every dollar to a job (so money doesn’t just disappear), and shows you how to do a zero based budget in conjunction with the cash envelope system.

We set up our own budget recently using the software called “YNAB – You Need A Budget” which uses the idea of zero based budgeting and cash envelopes, but in electronic form.

Dumping Your Debt

After you’ve set up a budget, and have instituted the envelope system to cut your spending, the FPU class looks in depth at how to categorize and get rid of your debt.

It gives an in depth exploration of the debt snowball system in which you pay off your debts from smallest to largest. The system is great for motivating people to get out of debt by giving them small wins, and keeping them on the path to debt freedom. It also explores ways to create new income – even temporarily – while you pay off debt.

The program also talks about the use of credit, how it has gotten out of control, and how they believe that you should forgo the use of credit altogether – especially for those who are in debt.

Making Responsible Purchasing Decisions

The program also spends a week or two looking at how class participants can make better purchasing decisions in order to stay out of debt, and find better deals in the process.

It looks at how companies sell to consumers, and helps tip people off to some of the sales tactics used and the psychology behind them.

It also looks at how to get a better price when you are buying, and how to negotiate a better deal. Those classes were some of my favorite in the whole series.

Planning For The Future

A whole bunch of the lessons right in the middle of the class are devoted to setting up a financial and life plan with your spouse.

The topics covered vary from buying insurance for your family (home, health, life, disability, auto, long term care) to investing and saving for your kids education. It looks at the many options, and discuss which options are the best and should be considered.

It also looks at buying and a home (What type of mortgage, how much can you afford, etc), the best ways to sell a home. It also has a week on considering your job and work life and what type of career you should be in. It talks about working in your strengths and finding a career that you’ll love.

The Reasons Why We Get Out Of Debt And Save

The final class – and throughout the 13 weeks one thing that is stressed is that you shouldn’t just be getting out of debt, saving and planning for retirement only for selfish motives. You need to be doing these things so that you can also focus on other more important things in life like giving to those in need, supporting people and programs that you believe in – and just being more giving in general.

When you’re drowning in debt it isn’t something you can really do, but when you’re out of debt and on track for retirement – it will allow you to live more and GIVE more.

Conclusion

The Financial Peace University™ class put out by Dave Ramsey and the Lampo Group is a great class that I would recommend to just about anyone who is interested in getting their finances under control, dismissing their debt, and moving towards a brighter financial future.

While there is a pretty decent investment in time since the class is 9 weeks long, and there is a lot of work involved as far as creating budgets, reading the book and workbook activities – it is all worth it in my opinion because the class is very motivational, and for thousands of people has helped to flip that switch to make a change.

The only caveats that I would place on the program surround the investing portions of the class.

While I think some of the advice is sound, I also think some of it is a bit dumbed down for the wider audience – and makes some assumptions that may or may not hold true (like a 12% return on investments). For the debt reduction and motivational aspects of the class, however, I think it is second to none. That, and Dave Ramsey is extremely entertaining to watch during the weekly videos.

Have you taken The Financial Peace University™ Class? Did it make changes to your life? Tell me your experience with FPU in the comments.

UPDATE: The Ramsey Solutions team has reached out and told us that due to the COVID-19 crisis, for the first time ever, they are now offering a free 14-day trial of Financial Peace University online. Check out the details here: FPU Online free trial.

Dave Ramsey's Financial Peace University™ - Program Review

Source: biblemoneymatters.com

11 Steps to Avoid Burnout When Paying off Debt

This post may contain affiliate links. Please read my disclosure for more information.

The key to avoiding burnout while paying off debt is to reinvigorate your motivation. Here are 11 ways you can stay motivated and energized to avoid burnout when paying off debt.

1. Work With Purpose

The first step to any journey is identifying the destination. It’s no different in becoming debt free. But debt freedom isn’t the destination. It’s an essential stop along the way, but understanding that there’s life after debt is imperative to making it out of debt and staying there.

What’s your purpose for getting out of debt? Ours is to have career and lifestyle freedom. We want to be able to quit or be let go from our jobs and have savings to hold us over until we find something else or create our own career.

When the struggle is real it’s this purpose that will grab you from your whiney tower and pull you back down to reality.

2. Use Time Management Hacks

Do you feel like you need more hours in the day? Maybe you just need better management of those hours.

There are productivity methods you can use to be more efficient and avoid burnout. I’ve been really interested in the Pomodoro method of breaking tasks into 25-minute chunks with 5-minute breaks. Lots of freelancers swear by it.

Start with the tasks you have, do those more efficiently and see if extra time to rest doesn’t pop up right when you need it.

3. Eliminate Tasks

Maybe with the best productivity hacks, you still can’t fit it all in. Between multiple jobs, family, friends, errands, keeping a semi-clean house, cooking, etc, etc, etc; you can’t do everything.

If your time is worth more working than doing simple tasks then you can afford to delegate rather than work less. You can hire someone to clean your house, have your groceries delivered, or buy the precut veggies.

Prioritize the tasks that get you closer to your goal and eliminate the ones that don’t.

4. Give

Giving time or money can feel like you’re connecting to the world even in your gazelle-intense bubble. We do it by volunteering and giving to our church but there’s no shortage of options for you to sacrifice a little to make a big difference in others lives.

I also think giving of your experience is helpful. It’s cathartic, reminds me what I’ve accomplished and helps others learn how to live through my story. You can do it through Facebook, Instagram, or by starting a blog.

I’m obviously an advocate for sharing stories through a blog. The number of people you can reach is huge. It’s also a way to pad your income and lay a foundation for establishing career freedom. You can read my how-to on starting and monetizing a blog here.

5. Exercise

I use exercise to break up the monotony of my day. When I was working three very inactive jobs exercising was the outlet where I could make the stank face I wanted to make all day and no one would ask me what was wrong.

And I don’t need to remind you of the physical benefits exercising has on improving energy, sleep, and motivation — but clearly I will.

I pay big bucks for Crossfit because the community and direction are invaluable to me. But there are plenty of ways to work out for free or cheap if it’s not as high on your priority list.

6. Celebrate Wins

Every time we pay off a loan we have a little celebration. Sometimes it’s as small as texting a ton of emojis back and forth and sometimes it’s having a meal out.

More than once my disdain for cooking has motivated me to put a little extra on a loan to clear it up and go out for dinner. Having fun times to look forward to keeps us motivated and has ultimately helped us get where we are quicker.

7. Stop Being a Perfectionist

Perfectionism is the enemy of progress. Relinquish the need to have a perfect budget, perfect income, or perfect life circumstances.

Emergencies will come up, weaknesses will win, and income may fluctuate but if you drive yourself crazy over every setback you’ll never win!

Embrace the mistakes and “Murphies” and you’ll have a much better time getting through this thing.

8. Track Progress

In our apartment we had a thermometer we’d color in when whenever we made a payment. It got lost in our recent move (RIP thermometer).

People have come up with really cool ways to visually track their debt progress. You can check them out here where I also have a downloadable thermometer pdf you can print off and color yourself!

9. Share Your Successes

I have a friend living 1200 miles away from me who texts me whenever she pays off a debt or makes a substantially good money decision. It allows me to encourage her by telling her how proud I am of her, how great she’s doing and I send lots of bitmojis.

Travis and I do this too. When we do well with money we lift each other up and encourage each other in our strengths.

Hearing from someone else that you’re doing well isn’t fishing for compliments, it’s reassurance that you’re making it! Find someone you can share with. This is really easy with a spouse but a supportive friend works just as well.

10. Keep Good Company

Having friends that are also paying off debt or are supportive of you doing it is clutch. Saying no to spending money can be isolating. Having friends who want to hang out at home or at parks instead of bars and restaurants make the weekends much easier.

Some people don’t care about their financial future right now. It doesn’t make them bad people or even irresponsible.

I repeat: It doesn’t make them bad people or irresponsible.

But you’re in a different place than they are and you need to keep company that’s on the same page or you’ll keep spending and spending because saying no every week is near impossible.

11. Be Real

Don’t be fakin it. If you’re behind on your debt snowball don’t pretend you’re doing fine.

The more you lie about your progress the more backed up you’ll feel which could lead to giving up. When you’re honest with yourself and the people around you, you’ll stay committed to the process and help more people with your story.

I hope these steps will help you avoid burnout and stay committed to this process, because it is worth every sacrifice and every no that comes out of your mouth. And I’ll be here every step of the way to see you through it.

<img data-attachment-id="1073" data-permalink="https://www.modernfrugality.com/steps-avoid-burnout-paying-off-debt/1-15/" data-orig-file="https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/05/1-e1496167199424.png?fit=400%2C707&ssl=1" data-orig-size="400,707" data-comments-opened="1" data-image-meta=""aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"" data-image-title="avoid burnout" data-image-description="

avoid burnout when paying off debt

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avoid burnout when paying off debt

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<img data-attachment-id="4790" data-permalink="https://www.modernfrugality.com/steps-avoid-burnout-paying-off-debt/mf-11-tips-to-avoid-burnout-while-trying-to-payoff-a-ton-of-debt/" data-orig-file="https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/05/MF-11-Tips-to-Avoid-Burnout-While-Trying-to-Payoff-a-Ton-of-Debt.jpg?fit=735%2C1102&ssl=1" data-orig-size="735,1102" data-comments-opened="1" data-image-meta=""aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"" data-image-title="Got a ton of debt to payoff?" data-image-description="

Tips to help you payoff a ton of debt without burning out. Tips and tricks from a woman who paid off over $78,000 in under 2 years on average salaries. #debtpayofftips #debtpayoffmotivation #budgetingtips #budgetinghacks #moneytipsformillennials

” data-medium-file=”https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/05/MF-11-Tips-to-Avoid-Burnout-While-Trying-to-Payoff-a-Ton-of-Debt.jpg?fit=200%2C300&ssl=1″ data-large-file=”https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/05/MF-11-Tips-to-Avoid-Burnout-While-Trying-to-Payoff-a-Ton-of-Debt.jpg?fit=400%2C600&ssl=1″ loading=”lazy” width=”400″ height=”600″ data-pin-title=”Got a ton of debt to payoff?” data-pin-description=”Tips to help you payoff a ton of debt without burning out. Tips and tricks from a woman who paid off over $78,000 in under 2 years on average salaries. #debtpayofftips #debtpayoffmotivation #budgetingtips #budgetinghacks #moneytipsformillennials” src=”http://www.hanovermortgages.com/wp-content/uploads/2021/03/11-steps-to-avoid-burnout-when-paying-off-debt.jpg” alt class=”wp-image-4790″ srcset=”http://www.hanovermortgages.com/wp-content/uploads/2021/03/11-steps-to-avoid-burnout-when-paying-off-debt.jpg 400w, https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/05/MF-11-Tips-to-Avoid-Burnout-While-Trying-to-Payoff-a-Ton-of-Debt.jpg?resize=200%2C300&ssl=1 200w, https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2017/05/MF-11-Tips-to-Avoid-Burnout-While-Trying-to-Payoff-a-Ton-of-Debt.jpg?w=735&ssl=1 735w” sizes=”(max-width: 400px) 100vw, 400px” data-recalc-dims=”1″>

Jen Smith is a personal finance expert, founder of Modern Frugality and co-host of the Frugal Friends Podcast. Her work has been featured in the Wall Street Journal, Lifehacker, Money Magazine, U.S. News and World Report, Business Insider, and more. She’s passionate about helping people gain control of their spending.

Source: modernfrugality.com

November 2016 Budget

This post may contain affiliate links. Please read my disclosure for more information.

I’m on a financial high going into November. It’s my favorite time of year; the weather is crisp, people are happier, and my favorite holiday, Black Friday, is right around the corner. I’m on cloud 9.

And I have one more thing making my money-saving heart flutter (or palpitate, I can’t tell the difference lately.) My student loan is now 4 digits. I’m finally under 10 grand! I didn’t see this day coming anytime in my 20’s and it’s here. You guys, hard work and perseverance pay off! And I’m really excited to have you to share this moment with.

So in November we decided to kick it into HIGH gear to get my student loan completely paid off by the end of the year. This was our original goal but we had a setback in April that made us plan to have it paid off in January. But thanks to a lot of overtime and the fact that I get paid on Wednesdays (and there are 5 in Nov this year!) we decided to get a little crazy.

Also Read: October 2016 Budget

In October you’ll remember we budgeted $3800 for student loan payment and we ended paying $4070 (Again thanks to Travis’ overtime from volunteering to pick up shifts.) I was on a shopping ban which basically meant no impulse buys. I worked from Starbucks once a week because I had a gift card and I bought shampoo and a shirt for Halloween (because these were at Goodwill and look how cute we are!)

Volleyball Player Costumes

Volleyball Player Costumes

We did pretty good sticking to the line items but went over in restaurants this month. Fitting since I just wrote a post about how much you can make by eating out less. But we spent less in gas than we budgeted so it evened out by the end.

Our Real Budget

November 2016 Budget

November 2016 Budget

We used EveryDollar to copy October’s [revised] budget and made a few adjustments. We cut our lifestyle budget almost in half this month and all the extra money we’re making is going to our $5,000 debt payment. Yes, you read right, $5,000.

I’m doing another month of the shopping ban because I used my personal money on some blog related items in September. You have to spend money to make money, especially in a competitive space like the Internet. But so far those investments have been paying off and I’ll definitely tell you about them someday.

I also wanted to point out our “giving” category. I’ve had surprisingly mixed responses to this one. We decided at the beginning of our debt freedom journey on a consistent $500 each month. This was definitely a compromise we had to make early on and once we found a number we were both comfortable with we just stuck with it.

Some very generous people can’t see giving less than 10% even while going into debt and some people won’t give anything while they’re paying off debt.

I give now because my end goal is to be outrageously generous. Giving is a gift not only to those who receive it but to me too! I don’t feel guilty about feeling real good when I give. Ultimately though, it’s whatever helps you sleep at night.

I run half marathons and nowhere along the race do I wish I’d trained less.

Giving now is like my training to give more later. And that’s how I justify spending more right now on giving than on my lifestyle. If you’re interested in this subject I highly recommend Generous Justice by Timothy Keller. A great read on why social justice is important and how you can be generous most effectively.

Our Real Budget

Our Real Budget

<img data-attachment-id="4828" data-permalink="https://www.modernfrugality.com/november-2016-budget/mf-how-we-paid-off-over-4000-of-debt-in-october/" data-orig-file="https://i2.wp.com/www.modernfrugality.com/wp-content/uploads/2016/11/MF-How-We-Paid-Off-Over-4000-of-Debt-in-October.jpg?fit=600%2C900&ssl=1" data-orig-size="600,900" data-comments-opened="1" data-image-meta=""aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"1"" data-image-title="How to pay off a chunk of debt in a short time" data-image-description="

Tips to help you pay off a chunk of your massive debt quickly. #budgetingtips #budgetinghacks #debtpayofftips #debtpayoffhacks #budgetingtricks #payingoffdebtquickly

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Jen Smith is a personal finance expert, founder of Modern Frugality and co-host of the Frugal Friends Podcast. Her work has been featured in the Wall Street Journal, Lifehacker, Money Magazine, U.S. News and World Report, Business Insider, and more. She’s passionate about helping people gain control of their spending.

Source: modernfrugality.com

6 Best Ways to Get Out of Debt and Achieve Financial Freedom

Debt is part of life, but you should never let it drain you to the point where you start to relate your own worth and happiness to financial obligations like debt. As difficult as it may be, it’s important to face your debts head-on and relieve yourself from that burden in order to achieve financial freedom.

Financial freedom is something most people crave to achieve, but debt can serve as a major roadblock to achieving that. In order to save more, invest, and become more financially independent, you need to free up the cash from your budget in the first place. I don’t know anyone who’s financially independent but still saddled with car loans, credit card debt and student loan debt. Thus, it’s safe to say that getting rid of debt is an important step that can help you reach financial freedom.

So how do you get started and stay on track to actually see results? Here are 6 ways to get out of debt and achieve financial freedom.

1. Assess Your Financial Situation

If you’re in debt, this is no doubt heavily affecting your financial situation. So many people believe that debt is normal or numb themselves to the fact that they owe a creditor a lot of money. This type of mindset won’t do you any good because it’s not helping you solve the problem.

Start peeling back the rug and carefully assessing your financial situation and the debt you have. You can start by reviewing your credit. How much credit are you utilizing and is anything in collections? There are tons of free sites that will allow you to check your credit score like Credit Karma and Credit Sesame.

Next, layout all your bills and list out your total debt balances, the minimum payments, and the interest rate. Doing this will give you a clear and accurate picture of how much debt you have so you can start to prioritize accounts and create a strategy.

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2. Negotiate with Your Creditors

As much as it is hard to negotiate with creditors, it can help you get out of debt quickly. You can start with prioritizing your bills from the most important ones like rent, mortgage, utilities as well as insurance and transport.

Make the payments or give the card issuer a call if you cannot make the minimum payment on a credit card. This way they will not have to do the tedious work of sending your account to collections or worse, tracking you down.

So depending on your credit history, you can be in a position to negotiate for a lower interest rate with your creditors or ask for a lower minimum payment. If you’ve been making on-time payments but your situation has changed (perhaps you endured a job loss or furlough), you may be able to negotiate payments, lower your interest rate, or defer payments.

Keep in mind that while payment relief options can be helpful, it should also be a small part of your strategy. You will still have to manage the debt so long as you don’t file for bankruptcy. Prioritize your debts by determining which ones you want to pay off first and which ones you can negotiate or defer. During the relief period, continue to work on paying down the other debt you’re prioritizing. Use it as an opportunity to get ahead and knock out a burdensome balance.

RELATED: 5 Steps to Negotiate Lower Credit Card Interest Rates

3. Lock Your Credit Cards

To avoid plunging into too much debt, you can try to minimize your use of your credit cards by either locking them up somewhere you cannot always reach, freezing them in a bowl of water, or cutting them up. If you are serious about getting out of credit card debt and know you have a problem with overspending, it’s wise to just stop using credit cards for the time being.

Eliminating the temptation to spend with credit cards can also free up more mental space and energy for you to focus on developing better money management habits.

Also, consider opting out of your relationship with certain creditors. You can opt-out of receiving pre-screened credit card offers by clicking here.

RELATED: Is It Better To Shop With Credit Cards or Cash?

4. Create an Emergency Fund

This is very important when you are trying to get yourself out of debt. It can help in times of need especially during emergencies and when your debt is high up on your neck. You don’t want to pay off debt only to get back into debt when an unexpected expense comes up. This is why it’s important to create a baby emergency fund to help you stay afloat so you don’t continue to borrow more money and dig your way deeper into debt.

Saving anywhere from $1,000 to $3,000 is ideal. Life is full of surprises so this money would definitely come in handy when life happens. Creating a baby emergency fund may slow your debt repayment process down a bit, but it will be worth it for the added protection.

Just be sure not to spend the money on non-necessities or expenses that are truly emergencies.

RELATED: 4 Reasons to Have a Large Emergency Fund

5. Spend on What Really Matters

You should start cutting back on what you do not need and start spending money on the essentials only. This way you get to save loads of money that would have been wasted on frivolous items and services.

As much as it seems frugal, it can be the best road to take and also give you some important habits that contribute to financial freedom. You can start by making payments of your most important bills like utility bills, rent, and gas. You can also swap eating out for some home-cooked meals.

Likewise, do some research on discounts, coupons, and other affordable deals before making any purchase. Such small cutbacks can help you save loads of money that you can save or use to pay your debts.

6. Budget

A proper budget be it monthly or weekly can go a long way when it comes to helping you become and stay debt-free. Nonetheless, you should try to stick to it and avoid spontaneous purchases.

Nowadays there are modern apps, software, and services that can help you make a proper budget and stick to it. They can even remind you of upcoming bills and make some financial suggestions to help you along the way.

You can also use your budget tool to spot some areas where you need to cut expenses. This way you save some money to either fund your emergency account or pay off some debts.

RELATED: 5 Things That Could Be Holding You Back From Your Financial Goals

Summary

You can become debt-free if you are disciplined enough to follow the steps needed in order to do so. These 6 steps are not the easiest, but they work and help you develop much better financial habits for the future. Remember, paying off debt is just one part of your financial journey and doesn’t have to represent your entire future.

Are you ready to take steps to achieve financial freedom this year? 

Source: everythingfinanceblog.com