There are many ways to get into debt these days. Just ask any of the approximately 80 percent of U.S. adults who currently owe money—whether it’s in the form of a mortgage, student loans, credit card debt, personal loans or some combination.
Getting out of debt tends to be a long process. It takes planning, commitment and sacrifice. Sometimes it feels akin to running a marathon: At certain points, you may feel like you’re not going to make it to the finish line. But for consumers who persevere, the rewards are great. There’s no feeling quite like defeating debt and realizing you can live your financial life on your terms from that point forward.
Step One: Get Out of Debt
If you’re still in debt, it helps to envision how good it will feel to make your last payment. Then you have to choose a strategy for making this goal a reality. The actual approach will vary by consumer based on the type and degree of their debt. Some people may choose a do-it-yourself approach to debt, reducing expenditures and putting their savings toward paying down
their debt.
In terms of more heavy-hitting solutions, debt settlement may be an option for you if you’re carrying near-quadruple digit credit card debt or more. Pro tip: Look up client reviews by company—i.e. Freedom Debt Relief review—before enrolling in any one program. After all, the success of debt settlement depends on successful negotiations with creditors and consumers sticking with the program long enough to zero out their balances.
Step Two: Celebrate Your Accomplishments
The day has finally arrived. You receive notification that your balances are paid. You want to do something appropriate to celebrate this life milestone—but you don’t want to book a pricey trip, make reservations at an expensive restaurant or buy a big-ticket item for your home. After all, you now have a clean slate. You’d rather celebrate frugally so you don’t blow your budget.
Here are a few wallet-friendly ways to celebrate:
Throw a potluck for your family and friends. When you’re in debt, throwing a party may seem out of the question because of the associated expenses. Rather than ordering catering or buying enough groceries to feed dozens of people, make it a potluck. With a little organization, everyone can bring a food or drink item to pass. This also adds a nice homemade touch to your celebration.
Start saving cash for a bigger experience. Instead of whipping out your credit card and charging an entertainment expense, grab an envelope. Fill it with cash over time at a rate congruent with your income. In a few weeks or months, you’ll have enough saved to go ahead and “splurge” on an unforgettable experience.
Host a board game night. Board games are an economic choice because they offer many different ways to have fun for a single up-front cost. Round up a great group of family members or friends and let the games begin—complete with snacks and beverages of your choosing, of course.
Contribute more to your retirement fund. Admittedly, this may not sound like a celebration right off the bat. But many people feel a sense of pride and accomplishment when they know they’re planning for their future. Debt can derail retirement plans. So, beating debt is a great time to reallocate funds into your 401k. For example, you may bump your contributions from 5 to 10 percent to 15 or 20.