Change your money mindset and beat your debt with these budget hacks and don’t be a debt statistic.
Working at a public pool summers when I was younger, I learned to watch swimmer’s faces for trouble to come.
You see, one of the first warning signs of a drowning swimmer is panic. The swimmer starts to freak out, thrashes about and then reaches out for anything that can save them.
It’s the same thing with debt.
Borrowers watch their debt piling up and start to panic as payments slowly put them underwater. They freak out and cling to every debt myth that only causes them to get farther in over their head.
Millions of Americans are to the point of drowning in bills and debt has nearly become a national epidemic. Saving your family means changing your money mindset and learning how to turn your budget around.
Just How Bad Has Debt become in America?
The average American household owes more than $50,000 in debt, and that’s not including mortgage debt.
Americans are drowning in credit card debt, student loans and personal loans with the monthly payments alone costing one-in-five dollars earned. It’s no wonder homeownership rates have been declining – who can afford to buy a house when they can barely make payments on other debt?
Not only is that mountain of debt weighing on realizing the American dream of, you see it in retirement savings as well. A report by the National Institute on Retirement Security shows that two-in-three millennials have nothing saved for retirement and it’s not much better for those close to retiring.
The dream of retiring to a sandy beach and drinks with little umbrellas is in danger of becoming a reality of dirty tenements and box wine.
How to Change Your Money Mindset and Pay Off Debt Forever
Keeping from being one of these bad debt statistics means changing your money mindset and getting back on track.
Changing spending habits and your mindset isn’t easy. Sometimes it takes a hard wake-up to how much you’re losing to interest every month. Use a credit card interest calculator to see how many months it will take to pay off your debt with just the minimum payment.
Making a $200 minimum payment on $10,000 in credit card debt every month will take you 94 months to pay it off at 18% interest. That’s nearly eight years and will cost over $8,600 in interest! Paying off that debt and putting the $200 a month into retirement savings will produce nearly $100,000 in just 20 years.
The motivation to become debt free might still not be enough to keep to your budget. I like creating a mental picture of my financial goals. This means visualizing what you’ll be able to do when you aren’t drowning in debt.
By sitting down and really thinking about your debt-free life, creating that mental picture, you’ll be able to go back to that place anytime your budget gets stressed. That additional motivation should help you get back on track and keep paying off your debt.
Budget Tricks to Help Pay Off Your Debt
Once you’ve resolved to pay off your debt, you can use a few budget tricks to save more money and break those bills:
- Try a spending challenge each month. Pick one expense that you can eliminate or cut back on. Set a tough goal for saving on it over the next month or two. These shorter-term goals focused on just one expense are easier to meet than trying to cut spending on everything, and you’ll be amazed at how much you save.
- Rank your debts by interest rate from highest rate to lowest. Make extra payments to the debts at the top of the list to save as much as possible on interest. That extra savings will make it easier to pay off your bills.
- Start a side hustle to make extra money. This doesn’t have to be a part-time job. Just a few hours a week over two or three months can help you make a thousand or more to pay down your debt.
- Make a list of your discretionary bills, all the things you spend money on that aren’t absolutely necessary. Then pick an alternative for each. Rent a movie instead of going to the theatre. Host a game night with friends instead of meeting at the club. Plan a picnic in the park instead of going to a restaurant.
America is heading to a full-blown debt nightmare, but it’s not too late to wake up. A little financial planning and a few budget tricks will go a long way to getting out from under that debt and turning your financial life into a dream-come-true.
Joseph Hogue worked as an equity analyst and an economist before realizing being rich is no substitute for being happy. He now runs five websites in the personal finance and crowdfunding niche, makes more money than he ever did at a 9-to-5 job and loves building his work from home business.