9. While you are paying down your debt, it is important to continue to track your spending. Each month evaluate how you are doing. Are you staying on track to paying down debt and putting money into savings? Perhaps you are consistently overspending on groceries and you may need to plan better for grocery purchases or perhaps you under budgeted in this category. Make some changes, but get your budget back on track.
10. Increase your savings as you pay down debt. At some point, when you feel comfortable with your debt reduction plan, try to find some additional money to put into savings. You may have to find additional income. This does not necessarily mean moonlighting. However you could find some income by doing yard work for neighbors and perhaps by getting a morning paper route. You can do temporary/seasonal jobs. Remember, no job is unworthy. Another option is to revisit your flexible expense category and cut deeper. Perhaps you were not willing to give up cablevision before or downgrading your cell phone plan. Getting money into savings may appear more important now as you see the results of your ability to pay down debt.
11. As you pay off your credit cards, do not, and I repeat, do not cancel those accounts. It will hurt your FICO score if you do.
12. Pay off your debt one by one. After we paid off our credit cards, we took the money from those payments to pay off our car loans. Our next step is to pay off our mortgage.
13. Think positive. Finally, don’t dwell on the present situation but think about what life will be like when you have the “debt monkey off your back.” Reflect how it will feel to have that stress gone. I made a list of how I would feel once the debt was gone. I posted that on my fridge so that when I got discouraged about not being able to go and get a professional manicure or being able to buy a new pair of jeans, I could look at that and see that the freedom I would feel when the debt was gone was more important than a professional manicure or an article of clothing.
Always remember that you didn’t get into this debt overnight and you won’t get out overnight. But, if you make a plan and work the plan, you will be taking some form of action that you hadn’t taken before.
I became unemployed in July 2009. With 9 months warning we were able to pay off enough debt to make it possible for us to live on my husband’s income. We were not totally debt free, but we had dramatically reduced our debt load and had some money in savings. We continued to work on our debt reduction plan on one income. It took longer to do on one income but we were able to pay off our debt except for 1 car loan and our mortgage within a couple years. It wasn’t easy. There were days that I wanted to give up when we would have an unforeseen debt that drained our savings but then I had to remember that there was a time when we didn’t have savings at all for emergencies.
Make a plan and work the plan. When you have accomplished your goal and are debt free you will feel happy and you will be free from the stress of having too much debt. Being debt free makes me happier than anything I could have ever purchased with a credit card.