Are you in debt and ready to get out? Good news: you can! No matter how much debt you have right now, it is well within your means to tackle and eliminate it. From managing debt to mastering the art of budgeting, empowering ourselves financially is a crucial step towards building the lives we desire. Let’s dive into some strategies to help you slay debt and thrive on a budget.
Step 1: Know Your Numbers
Knowledge is power. I know sometimes we don’t want to face the numbers head-on, but it’s the only way to make progress. So the first step is to grab your latest bank statements and credit card bills. Review the past 6 months of bank statements in order to identify patterns and catch any one-off fees or payments that happen and may come up again. List down your total debt (including credit cards, student loans, etc.) and minimum monthly payments. It’s important to have a clear view of your starting point.
If you need help assessing your current financial situation, The National Foundation for Credit Counseling (NFCC) offers free financial counseling and educational resources and the Consumer Financial Protection Bureau (CFPB) provides information on managing debt and protecting your rights.
Step 2: Create a Budget That Works For You
Budgeting often gets a bad rap. But a budget isn’t meant to restrict you; it’s your roadmap to financial freedom. Start by tracking your expenses meticulously to identify areas where you can cut back. Do this for at least a month to understand where your money goes. Categorize your spending (rent, groceries, entertainment, etc.) and be honest with yourself. Apps like You Need a Budget can assist in crafting and sticking to your budget.
One method of budgeting is Zero-Based Budgeting, which is a method where you put all of your money toward expenses for needs and wants, as well as short- and long-term savings and debt payments. The goal is for your income minus your expenditures to equal zero by the end of the month.
Step 3: Prioritize Your Debt—Choose a Debt Payoff Method
Believe it or not, all debt is not created equal. High-interest credit card debt should be tackled first. Consider the snowball method: pay off the smallest debt first to gain momentum and feel accomplished. Conversely, the avalanche method targets debts with the highest interest rates, minimizing the overall interest paid. Choose the approach that aligns best with your financial goals and preferences.
For assistance with debt management, check out the National Consumer Law Center, which offers resources and guidance on dealing with debt collectors. Be encouraged by and learn from others who have paid off their debts, like Jade Warshaw, who was able to pay off over $460,000 in debt with her husband, Sam.
Step 4: Celebrate Your Wins!
There will be bumps along the road, but keep going. The quick wins will come, and hold on to those to get you through the journey! It’s psychological: “The positive feeling you get when you succeed is what ultimately builds confidence. It builds hope that you will be successful again. When you are confident and hopeful, that improves your ability to focus naturally” (Psychology Today). Celebrate every milestone, no matter how small it seems. Remember, you are building a secure future for yourself and future generations. Surround yourself with a supportive community like the one here at Black Women Invest.
By understanding your debt, crafting a budget, implementing repayment strategies, and investing in your future, we can pave the way toward a brighter financial future. Just making it to the end of this blog means you’re well on your way!
