Get Out of Debt, Part 2: Grab the Bull by the Horns

The bullfighter

« Read Get Out of Debt, Part 1: Stop the Bleeding

Like most things, getting out of debt is about doing the right things in the right order. So it’s no accident that Part 1 is about how to cut your expenses.

Cutting your expenses is the easiest part. And making some progress there will give you just enough momentum and enough light at the end of the tunnel to do what you have to do next. Which is manage your debt and increase your income.

It’s time to get in the game. It’s time to grab the bull by the horns.

Managing your Debt

Consolidation is NOT the name of the game.

The problem with consolidation is it usually requires you to get more credit like a big low-interest loan to put all your debts into. But the danger is, you still have access to all the credit that’s hurting you now. It’s better to consolidate using existing credit. If you already have a low-interest line of credit, transferring your expensive credit card debt to it will cut the amount of interest you’re paying every month.

The best way to manage your debt is to use a simple set of rules.

  1. Pay off high interest debt first. This means making minimum payments on your low-interest loans and making the biggest payments you can afford on your high-interest credit cards.
  2. You only need one card. You can do anything, anywhere in the world with a single Visa or Mastercard. All you need is one of those cards. Cut up the rest and pay them off first.
  3. Pace your payments. Cutting your expenses and increasing your income is what wins in the end. If you make a debt payment that you really can’t afford, and then have to rely on your credit to pay the electric bill 2 weeks later, you’re keeping a bad habit alive. Pay what you can pay while still living your life.
  4. Practice smart habits. At some point, you’ll pay off all your credit cards including the one you’ve decided to keep. Use it, but only for things you would normally buy like groceries. While you’re working to pay off the rest of your debt, pay that credit card off in full EVERY single month.

Now, you’ve cut your expenses and have started managing your debt. It’s time to put the final piece of your plan into action.

Increasing your Income

The flip side of cutting your expenses is increasing your income. It’s not enough to do one or the other. Doing both will literally double your results and get you out of debt faster than you ever imagined.

Here’s a list of the obvious:

  • Get yourself a pay raise
  • Work all the overtime hours you can
  • Get a second job
  • Work odd jobs that you find through friends, relatives, or neighbors
  • Find a different job that pays better
  • Start selling all the stuff you really don’t need
  • Concentrate on one thing with your own small business; selling

The list is just a reminder. You already know what to do and how to do it. The trick is to make it your mission to make at least 2 of these things happen.

Increasing your income might be the hardest part of getting out of debt. But by now you’ve got the bull by the horns. The bull is tired. And the crowd comes to the arena for one reason; to stand up and cheer.

They need you to win so they can stand up and cheer.

We’re not quite done. In Get Out of Debt, Part 3, I’m going to talk about the mindsets of debt vs wealth. As you make real progress in eliminating your debt, how you think about money will change.

You’ll start to “think rich”.

2 thoughts on “Get Out of Debt, Part 2: Grab the Bull by the Horns”

  1. More solid advice, Shane. For me, grabbing the bull by the horns meant tracking my spending, and getting a written game-plan together. When you do this and realize how much you actually waste, it’s very sobering.

  2. Anthony,

    It’s amazing how the little things add up. And it’s good that you actually wrote it all down and looked at it. It’s very sobering. It takes a surprising amount of courage …

    I’ve talked to a lot of people who don’t want to look at their situation. They don’t want to know the ugly truth. They don’t want to deal with it. They just want it to go away.

    Debt needs to be confronted. Head on.

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