Debt-Free Forever Gail Vaz-Oxlade (best ereader for epub TXT) 📖

Swap a bad habit for a good one. Love candy? Can’t walk by the coffee shop without dropping $3 for a caffeine boost? Smoke, drink pop or booze, chew gum? Start giving up your bad habit slowly, and reward yourself with a good one—debt repayment—as you do. Go from smoking 20 cigs a day to 15, and add the money you didn’t send up in smoke to your debt repayment plan. Walk past the coffee shop just once and you can add another $3 to your debt repayment. You’ll be amazed at how satisfying—and addictive—becoming debt-free can be. Once you’ve converted, find an apostle and spread the word!

Add whatever you’ve squeezed out of your budget to the payment on your most expensive debt. If you managed to chop $300 from your expenses, add that $300 to the payment on the first debt on your list.

GAIL’S TIPS

Make a payment whenever you have an extra 10 bucks to dump on your debt. Don’t wait for the due date. If you owe money, it’s always due. The faster you make a payment, the quicker you turn off the interest clock.

Every penny counts. Start carrying a notebook around with you, and whenever you save money on something—because you used a coupon, because you got it on sale, because you decided not to buy whatever it was that was on your list—write it in your notebook. When you get home at night, make a payment of however much you’ve saved that day against the debt that’s at the top of your list. (This assumes you don’t end up getting dinged for bank charges on every payment. If you have a transaction limit, save it all up and do it once at the end of the month.) Now you’ve put what you saved to good use, as opposed to leaving it in your cash flow where you just end up spending it on some other crap. Scour your house for all your change. And every time you empty your pockets of change, add it to your change pot. At the end of every week or month, deposit it to your bank account and then immediately use that money to make a payment against your most expensive debt.

Have you heard? Less is the new more! If you have to sell stuff to get out of debt, that’s what you have to do. Go through your home, room by room, and choose two things you can live without. Have a yard sale, list things on craigslist or eBay, or sell things through a consignment shop. You might not get a lot for whatever you’re selling, but whatever you get is money you won’t have to pay interest on. Apply that money to the debt at the top of your list.

GAIL’S TIPS

As tempted as you may be to cash in some or all of your retirement assets to get rid of your debt, don’t do it. Not all sources of cash are appropriate for debt repayment. It’s never a good idea to cash in retirement assets to pay off debt because when you take money out of a retirement plan you trigger taxes on that money.

The discomfort you’re experiencing from being in debt is good if it keeps you focused on getting back into the black. But if you can’t stand the weight of the debt, you want to get rid of your debt faster; instead of using 36 months as your end date, choose a shorter term. Thirty-six months is the longest it should take. But becoming debt-free forever may be so important to you that you choose to set a goal of being out of the hole in 30, 24, or even 12 months. While some people can plod their way to debt-free forever, maintaining a balanced life while they do so—and this is my preferred approach to everything—there are some folks for whom a single-minded focus is a key part of their success in getting to debt-free. These are the people who tend to dive into everything they do with fervour. If you are one of these people, setting a shorter timeline and busting your butt to get to debt-free may be the only way you can do it. So be it. Do whatever it takes.

If you look at the work you’ve done and think it’s all too hard, there’s no point, it’s a lost cause, and you’ll never be debt-free, then you’re choosing not to take the steps necessary to get yourself out of debt. You can’t whine about being in debt. Nope. You’ve made your bed and now that it’s full of fleas, you’ve only the dog in the mirror to blame!

Cancelling Credit Cards

You’ve decided to become debt-free. You’ve taken the bull by the horns and not only made a budget, but come up with a debt repayment plan that will see you in the black in three years or less. While you still have a bunch of cards in your wallet, you’re determined to trim your exposure to credit. Here’s what you should do:

Look back over your credit card statements to see which ones are the oldest and have the healthiest credit histories—read “no missed or late payments.” You’re going to hang on to these to keep your history intact until you’ve built a sparkling credit history elsewhere.

Choose the two (at the most) cards that you want to keep. These cards may have lots of benefits: travel bonuses, cash back, really low interest rates, whatever toots your horn.

If the card(s) you want to eliminate has a good history, start by reducing the limit on the card to reduce your credit exposure, but keep the card active. After six months, you should have built up a more solid history on your two newer cards, and can close the old card(s).

GAIL’S TIPS

Cutting up your cards does not cancel your account. It simply removes the ability to use the card—and