Working Towards A Debt Free Lifestyle In 8 Steps

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Working towards a debt free lifestyle is possible, that is if you really want it bad enough. I’m sure you all know that the 8 steps are only stepping-stones, meaning one step leads to another. Perhaps you may learn that our steps differ from what your ideal steps are but learn to create your own. You may only need 1 step but the first step may be the most important of all. You can make that happen.

There may be some of you who didn’t start saving early like we did but that doesn’t mean you can’t follow the road to debt freedom. Start today. If you take a sincere interest in wanting to learn how to pay off all your debt and start saving for all the things you’ve wished for in your life, it can happen. Sometimes we have to make sacrifices to get ahead especially if you are in a relationship.

Getting rid of our mortgage was one of our top goals when we bought our home so instead of investing in renovations like we wanted to with the extra money saved, we backed away from them. We didn’t invest all of our savings into our home down-payment because we wanted to do major renovations but that all quickly changed.

One thing I’ve learned as a homeowner is that sometimes things don’t always goes as planned, you might have to skip a step which you can later return to. One of my biggest challenges was establishing myself in Canada and building credit as a permanent resident. I had a lot on my plate so some things had to be put on hold.

It was more important for us to reduce personal debt which was our mortgage then to think about what we needed to modernize around the house. Of course yearly maintenance was always completed it was more about living the debt free lifestyle that meant more to us than a new kitchen or $10,000 spent on new hardwood floors.

This is not all-inclusive but a personal insight which helped bring us to our almost free, debt free status today. I’ve also learned along the way that in order to make it to the debt free lifestyle we had to get past the obstacles that so many face. I’ve detailed below 8 steps that we’ve met or met along the way.


Marriage and Debt


When most people get married they take on each others debt, the “what’s yours is mine and what’s mine is yours” is a saying we all know too well.

There was no “my debt” when we got married it became “our debt” and yes we did have debt in the form of vehicle payments on a 0% interest vehicle over 60 months and everyday living expenses including rent. I paid cash for my vehicle but I also had to save money to pay for my education which was not in the first plans. So where I had no debt she compromised by paying the bills so we could get ahead.


How I Earned Extra Money


I would earn extra cash by repairing our friends kitchen by adding a back-splash to their new modern home. I didn’t charge them an outrageous fee because I wanted to help them out like he was helping me. I made $100 cash and he took me out for Chinese lunch where we laughed and had a couple of beers.

Another time I helped a friend who wanted me to fix her dishwasher connection and install her kitchen work-top which she had pre-cut from Home Depot. I did all of that for $15o because I knew that she was a single homeowner and didn’t have lots of  spare money to splash around. No, I’m not assuming either, she told me so in conversation. It was more important for her to use her savings to buy a town-house instead of renting.

I also took the liberty of joining focus groups in our city that paid cash for my opinion. It was the easiest extra money I’ve ever made. There’s nothing like talking about coffee, road salt, cigarettes and I can’t remember how many other topics earning anywhere from $50- $100 for less than an hour plus they fed me dinner.

I did whatever it took to earn money so I didn’t have to pull from the savings that we worked so hard to build since we were in our twenties. There are so many ways to make extra money to pay off bills and even if you can’t leave home you might be able to offer your services as a tutor or babysit from home to help out a parent who is in need.


Not My Debt


If you open your bills and prance around with your fingers in your ears, turning a blind eye and rhyming off the, “it’s not my debt la la” tune like a child, get over it. Stop dissing the debt and saying it’s not yours, I didn’t create it so I’m not paying it. If it’s in your name you are likely responsible for the money owed so waste no time, find out who you owe money to and start paying the money.

If you are in the middle of a legal battle then consult your lawyer to get professional advice instead of leaving the debt unpaid month after month. The last thing you need is a red mark on your credit report that may follow you for years. Not all debt is created equal but unfortunately some people pay the price and have to learn from their mistakes.

A friend of ours who is now divorced had a credit card in her name while married. Her ex-husband charged all sorts of purchases made online to that card but she was still responsible for it when they split. He had no money so she was forced to pay for it or risk a bad mark on her credit.


Paying Off Student Debt


Student debt, so many people of all age groups are faced with paying back student loans in the form of OSAP or a credit line from the bank. Many students also have credit cards that are maxed out and soon realize after the fun is over in University and College that they are now in the “real world”.

You might not have been the person who was partying every night of the week but you still have debt. School isn’t cheap and it’s not getting any cheaper which really is depressing for many students. If you want to pay off your student loans fast then forget about all the fashion and eating out every night of the week, focus on your personal finances.

Sure you can balance life with a budget but if you’re just adding more debt on top of debt it may prove difficult when you want to move forward with the next stages of your life. If you’ve moved back home with mom and dad don’t get too relaxed unless you plan to stay at home until you get married.

Even then you still leave home with debt if you haven’t taken the opportunity your parents are giving you living at home with a little to no rent to pay it all off. They are doing this to help you, they understand what it’s like out there.

When I went back to school as an adult for the second time we had to buckle down on all the spending. I had already saved to pay for University once and I had to do it again. We lived pretty frugal during those years before we bought our house.

It was in line with our goals and we never felt like we were giving anything up, we were gaining, if anything at all. Our lives were put on hold while I was learning and costing us more money than anticipated.

No one likes to hear it or face it but debt doesn’t just go away and as a student you may not have bought a house  yet or even a car. Never-mind if you want a big wedding with all the bells and whistles followed by starting a family. Debt may be your worst enemy.


Owe You Money


Who owes you money? Don’t be shy to ask if someone owes you money especially if it’s friends or family. We had loaned a family member over $30,000 dollars and you can bet we won’t be forgetting about it. The money has been paid back but there are people out there that loan out $5 here and $10 there to friends who say they will pay you back and don’t. Letting them get away with that is not good enough especially if you wouldn’t do the same.

The person is not learning responsibility for their actions and needs to be called on it. My wife had a friend who would always borrow smokes from her. She would tell her that she’d “pay her back” well that never came and my wife wouldn’t say anything because she knew she was struggling for money.

The thing is, maybe she was but my wife wasn’t helping by allowing her to think she can get things for free and not pay for them. If you truly want to help someone and don’t expect the money back then agree to it from the start. Simply say, “hey no worries, it’s OK”.

There is no reason you can’t help someone out but you also can’t be dishing out cash to everyone. It’s the same with your child. If you offer your teen $5 to mow the lawn for example ( I know not all parents pay for chores and that’s fine) and he/she agrees but asks for an advance on the money and you give it.

The problem is the teen mowed the lawn, not the next day or the next week, not ever, the father did. The teen didn’t learn a lesson at all. What he/she learned is that mom and dad are soft and I can get away with things if I need to and someone else can do the work. This lesson may also carry on with this teen into his adult life.

If you keep passing out cash like you have endless amounts of it then you will soon see your savings dwindle or not grow as much as they could. It may not seem like much but small amounts add up quickly, don’t believe me, if you have debt than you should. It’s true!


I Owe Money


Who do I owe money to? If you owe money to anyone you’ve got debt. As far as I’m concerned there is no good debt. If you owe money you should pay it back in a reasonable amount of time. What’s reasonable depends on how much interest you are willing to pay and how much money you can earn through investing. Not everyone shares the same values when it comes to money and investing so make your own informed decisions.

Figuring out who you owe money to should be a priority when working towards a debt free lifestyle. You need to know all these important details and have them easily available for review. I can’t tell you how many people I’ve talked to that have no idea who they owe money to.

I bet if I asked someone who owed them money they could rhyme names faster you can shake a stick at. That’s how well you should know your finances, inside out. If you owe money it should be a priority to pay off your debts. Don’t pretend like they aren’t there or that they will go away on their own.

If you think paying the minimum payments on all of your debts is putting a dent in them you may be surprised to find out that’s not always the case. When Tony came to me and said that he paid off over $100,000 in debt I knew anything was possible. It does take more than money it takes courage and a want to want the debt free lifestyle.

If you aren’t making enough money than maybe you should look into what options are available to you in order to earn more or simply spend less. Remember Katrina, she’s in a better place with her finances now because she created a business to earn extra money with her passion and skills to pay off her debts. She knows what she wants and is working towards a debt free lifestyle.


Budget Plan and Invest It Wisely


If only, have you ever said that to yourself you wished you had done something sooner? It happens whether it’s buying a house when the interest rates are low and houses are relatively decent priced, investing in stocks and other investment, applying for a job or even taking care of your personal finances with a budget. Whatever you choose to do with your money make informed decisions that you can live with.

I won’t go into great detail here but if you’ve never budgeted before It’s safe to say that you aren’t too familiar where to begin or you know how you just need a push to start. You can read my budgeting series which I wrote where you will see the Canadian Budget Binder budget sample that we use for our own family budget. That budget didn’t happen over night it took over a year of practice, making changes and we continue to do that month after month.

We started our budget by creating a sample budget, not one but two budget samples so we could evaluate what a budget would look like with our current net income and another sample budget only using one income. You don’t have to go all fancy with a budget unless you want to but we kept it simple.The reason for the second sample was to investigate how our lives would potentially be affected in the event that one of us was no longer here or we lost a job or could no longer work.

Getting started with the budget was one of our priorities and still is today. Saving almost $185,000  to pay down our mortgage since 2009 was given a kick-start simply by focusing on where our money was going. No, we did not save that much in a few short years with a budget but a combination of everything we’ve talked about in this post has helped us to build up our savings.

Budgeting isn’t for everyone and many people I know are successful in their lives without using one and that’s great. Decide what works best for you.


Spend Less Than You Earn


If you follow my blog you’ve probably got my quote engrained in your head by now as it’s at the bottom of just about every post. “It’s Not About How Much Money You Make , It’s How You Save It”. I do that on purpose because the more you see something the more it might sink in. We are all creatures of habit and unless we choose to make changes we will continue to do what we are used to.

You can be frugal and still enjoy your life and for some living a minimalist life seems like the better way to go. If buying new clothes is important to you pick a few up quality pieces that you can mix and match. If you get your clothes at second-hand shops that’s great as well. There are endless ways to save, you just need to know where to find them.

Some great posts about minimalist lifestyles have popped up in the personal finance scene such as Michelle from Making Sense of Cents who shares tips on spring cleaning your wardrobe and well on her way with her extraordinary extra income.

Jordan at My Alternate Life took on the minimalist challenge  back in 2012 when her and her fiancée moved from an apartment to their new home. She vowed to de-clutter and get rid of the crap they were collecting for years.

Sometimes having too much stuff or clutter in your environment tends to swallow you up. We opt to not buy more than we need in our house and keep “stuff” to a minimum. We also get rid of what we no longer use if we haven’t used it in 6 months to a year because we likely won’t if we haven’t by then.

I’ve saved my money since I was young and bought my first house at 21 years old. If I can do it anyone can. I still had lots of friends and enjoyed spending time with them. As an adult I still do the same but I know I don’t have to be flash with the cash to enjoy myself.

“I Am A Saver” is a stark reminder for me because I learned that I don’t want to pay for mistakes that I could have easily avoided. If you want to live a debt free lifestyle like we are today, let go of the negative mindset and just get on with it. It’s going to take time, but that’s all we have is time, just balance it with some fun. Stop dreaming about how to live a debt free life, start living it today.

What ways do you work towards living a debt free lifestyle? If you don’t want to be debt free what are your reasons?

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