4 Steps To Kill Your Debt

4 Steps To Kill Your Debt
Photo by Sasun Bughdaryan / Unsplash

*** The 'Beat The System' Series***

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I will never forget the day I became debt-free, never! The dark, heavy cloud lifting of my shoulders and exposing a 'New Me' at the same time. What a feeling it was! I did not know it at the time, but I just completed my first building block to beat the system.

You see, I was forever getting angry and trying to fight the system. Eventually, I learned that I would never win, because the system is bigger than me. However, I could beat the system at small little battles scattered throughout my life. A light-bulb moment!

"Eureka!", I shouted. I found the magic sauce! Don't FIGHT the beast, but BEAT the BEAST at its own game. Since that realization, I have been involved with guerilla warfare against the so-called system.

Celebrating my little victories and promising myself to help others adopting the same tactics.

Consumer debt is one of the biggest contributors to suicides and domestic violence. A sad reality in a world that run on credit cards and personal loans. So, if you are currently in bondage to the bank, then focus and apply the following four steps:

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Step 1: Face your fear and acknowledge your debt.

Speaking from experience, I know that many people in debt try to act as if it does not exist. As if the unopened bills from the creditors do not exist if you don't open the envelopes. In doing so, you become detached from the reality of your debt, and while the amount is getting bigger you are trying to hide from it.

The first step to becoming debt-free is to acknowledge the fact that you have debt and that you need help to get out of it. Without you coming to the table with commitment and willpower, your chances are slim to none to claw your way out of the hole.

Step 2: The calculation & communication phase.

Now that you have committed to facing the problem it's time for an excellent excel sheet.

List every single creditor with all the amounts that you owe them.

List every single term as well as the interest rate they charge you.

By doing this you are now clear on the exact amount of your debt and you have a list of the creditors.

Now, I want you to call each and every one of them and let them know that you are aware of their recent communication and that you are in the process of designing a payment plan for all of them.

By doing this you are showing the creditors that you are not running away and that you are willing and committed to sorting it out.

At this stage of the game, you have a clear picture of how much you owe to whom and you have made contact with all of them. This is a great sign for the creditors and they will be willing to negotiate on small repayment amounts, but when you ignore them, they become nasty.

Step 3: The Action Phase:

Here you have two choices;

- No 1; speak to a debt counselor and together you could look for a professional, registered financial business that would be willing to consolidate your debt. This will ease your admin nightmare of keeping up with all the different payments and you will only have one payment per month.

Before doing this, you will need to be clear on the maximum amount of money you can spend on servicing your debt. If this is in line with what the financial institution can offer you, then you have a winner.

-No 2; Say you have ten creditors; you can list them on an excel sheet in order of biggest amount owed or highest interest rate applicable to the amount owed.

You have identified the amount you can spend on debt per month and now it's time to divide it between all ten creditors.

Take 80% of that amount and pay the creditor at the top of your list.

Take the remaining 20% and split it into nine small amounts to keep the balance of the creditors happy. Keep doing this until the first creditor is paid off and then rinse and repeat the formula. Keep in mind that the amount you have chosen to repay monthly debt does not change. Every time you move down to pay the next creditor the 80%, that amount becomes more because there are fewer creditors on the list.

This is called the Debt-Snowball-Repayment -Plan

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Step 4: The Celebration Phase:

If you have stayed focused and determined there will come a time when you will pay the last installment to the last creditor.

That is the day that you crack open the champagne and shout Hallelujah!  

I am no longer a bondage slave!

Tip: Once all the debt has been cleared, start saving the amount you used to pay on the debt. Slap it into a high-interest account or buy shares in established companies.

Don't fall for the debt trap – it's a killer.

Less is more - Minimalism Rule.