How to Get Out of Debt Fast
Do you have multiple debts? Do they make money tight for your normal life expenses? Do you feel like they’re weighing you down? Do you feel like it’s a never-ending struggle to pay them off?
I’m going to show you how to pay off your debts super fast through the use of some fun word problems that we all knew and loved in the third grade. Well at least I liked them. I think…
WORD PROBLEM #1
Think of a shower full of half-empty shampoo, conditioner, and soap bottles (this is an actual problem when you live in a Navy community and your home is an unofficial Bed & Breakfast for sailors, like mine is). You need to get rid of all these bottles, but you don’t want to waste the soap by just throwing them away.
Which bottles of soap do you use each time you shower to declutter your space the fastest?
A) Choose a different one each time you shower
B) Start with the emptiest shampoo/conditioner/shower soap first and use only those each time you shower
C) Blend them all together so you have only one large bottle of shampoo-conditioner soap
D) I don’t do word problems. Pass.
The answer is B! You start with the emptiest first! That trio of bottles will be gone in no time! Then you’ll have a bit more room in your shower and be able to begin on the next bottle. Ahhh, the feeling of having a cleaner house!
If you didn’t notice, the debt consolidation option is metaphorically present in answer C. This option draws your debt out longer (because you are still focusing on all the debts at once), puts your house on the line (if you have a mortgage and are behind on a payment), and costs more due to consolidation loan costs.
Here’s another because I know everyone LOVES math, and word problems especially.
WORD PROBLEM #2
You have a handful of carrots. You took so many that it’s hard to hold them all. You can’t lighten the load with the other hand because you’re eating with it (this has happened to me before – it’s a real and serious dilemma). There are so many carrots in your hand that you think you might drop one!
Which carrots do you eat to reduce the amount of carrots in your hand in the quickest way?
A) Switch off taking a little bite of each
B) Start eating the shortest carrot, then move on to the next shortest carrot when that one is done
C) Find the nearest horse ranch and feed a horse the excess carrots
D) Start thinking about WHY I HAVE SO MANY CARROTS IN MY HAND IN THE FIRST PLACE
The answer, of course, is B again! You start with the shortest one first! That carrot will be gone before all others because it takes the least amount of bites to finish! Once that one is gone, the rest of the carrots will be easier to hold.
HOW DOES THIS RELATE TO DEBT?
Many times people have more than one case of debt. They might have a few student loans, car payments, credit card debt, a business loan, and a mortgage. Most of the time people are paying as much as they can on all of their debt at the same time, but let’s think about why that’s not the best way out:
If you pay off your smallest debt first, then you’ll be able to put all the money you were putting towards that debt towards the next debt, along with the minimum you were already paying on that second debt. If you pay them all a little each time (above the required minimums), you’ll be paying for longer, which means that more money will be tied up and you may even pay more in interest.
More time paying off debts = more interest payments + more time in debt.
So here’s what you do:
1. Pay only the minimums on all your debts every month.
2. Pay extra on your smallest debt.
Budget out an amount above the minimum that you can start paying on your smallest debt. If you can organize your finances and be mindful of your purchases, you should be able to pay a good amount of money each and every month to steadily pay this off.
3. Once the first debt is paid, add that whole payment to what you are already paying on the next lowest debt.
This debt payment snowball effect means you’ll be paying huge amounts on the particular debt your money is focused on, without actually paying more from your paycheck. You’ll be using the minimum of the first + the extra on the first + the minimum on the second to kill this debt, which means it will dissolve faster than ever!
4. Repeat until you’ve destroyed your biggest, baddest debt!
Think about how much money you’ll be able to put towards the third debt when you can focus all the money you were giving to the first and second debts to it! Pretty soon you’ll be completely debt free! Yipee!
So remember, when it comes to your debt, think about it as a handful of carrots… or a house full of naked sailors. Whichever works best for you.