The Debt-Free Mindset: Seven Questions to Help You Get Out of Debt
By the way, if you are married or in a committed long-term relationship where you share finances, discuss these questions with your partner. Working on your money together significantly improves the chances of succeeding financially and of staying together happily as a couple.
1. Why Do You Want To Be Debt Free For Life?
You could write, "I'm carrying $10,000 in credit card debt, and it stresses me out, and I'm worried every month when the bills come. I'm paying 19% in annual interest, and I feel stupid wasting this money -- so the faster I pay it down, the better. I know when I pay it off I will feel GREAT." That's a simple answer, but you get the idea. Then again, you might read that question and come up with a deeply personal, more spiritual reason.
2. Why Are You in Debt?
My goal with this question is not to have you beat yourself up, but rather to have you face the truth about how you got where you are today. Did something tragic happen, like a medical problem? Did you lose a job? Did you buy a bigger house than you could afford? Did you live beyond your means? What happened? Answer the question from your heart as honestly as you can.
3. How Much Debt Do You Have?
If you completed the DOLP worksheets from last week, you should have a clear idea of your total debt. Go ahead and just write it down now: "I estimate that my total debt (house, cars, student loans, credit cards-you name it) as of [today's date] is $________.
4. What Percentage of Your Income Goes to Pay Interest Charges on Your Debt?
This may be the most eye-opening question. If you've completed the DOLP worksheets, you can use that information. If you haven't, then pull out the most recent statement for every loan you have -- mortgage, car loan, student loan, and credit card. You're going to use this information to figure out exactly how much of your monthly payment goes to interest charges.
For example, say your mortgage payment is $2,000 a month. Chances are that less than $150 of that goes toward paying down the principal. The rest is going to interest. Look at this for each loan; call your lenders for the facts if you have to. Once you add up all the interest you are paying, you may find that more than half your take-home pay is going right into the lender's pockets -- without helping you make one inch of financial progress.
Now it's time to figure out the percentage of your pay that goes to interest:
- My total interest payments each month are:
- My take-home pay each month is:
- (Divide your total interest payments by your take-home pay.)
- The percentage of my take-home pay that goes to pay interest charges is: ____ %
5. Who Can Help You Get Out Of Debt?
If you follow the plan I lay out and use the tools I provide, you should be able to get yourself out of debt. But maybe you're not the do-it-yourself type. Maybe you feel you'll need a professional credit counselor to help guide you through the process. If that's true for you, then great -- write it down. And even if doing it yourself is not a problem for you, if you have a family, you are going to need their support to get out of debt. It's hard to get out of debt if the people around you are spending you back into it. So if you have a spouse and/or kids, you may want to add them to your answer here. Also, you should definitely add me to your list -- because I am committed to helping you. I can start by offering you a free trial to my new revolutionary debt reduction tool called Debt Wise. Learn more about this tool and get your FREE trial by clicking HERE.
6. What's The Worst Thing That Could Happen if You Don't Get Out of Debt?
It's important to face your fear about debt. What is your life likely to look like in the future if you don't deal with your debt? Facing your fear about your debt is not being pessimistic -- it's being honest. The more honest you are right now, the better. So tell yourself the truth. Write down your worst-case scenario. It will motivate you to act decisively to start dealing with your debt.
7. When Will You Start to Get Out of Debt?
Below you will find the "Debt Free For Life Pledge," which I've created to mark your new commitment to leading a debt-free life. By signing it, you are making a promise not to me but to yourself and your loved ones -- a promise that you are truly headed toward a new life of financial freedom. Signing this pledge you will be automatically entered to win $10,000 to put toward paying down your debt! Here is how you join the movement -- you can just copy and paste the pledge below and sign it (without entering to win the prize). If you want to join the challenge community and the chance to win $10,000 go to www.finishrich.com and take the Debt Free Pledge online or go to directly to the challenge site by clicking HERE http://www.debtwise.com/debt/
THE DEBT-FREE FOR LIFE PLEDGE
I __________________________ [insert your name] commit to being out of debt by __________ [insert date]. I believe that paying down my debt and being DEBT FREE FOR LIFE is critically important, and I am ready to work to make it happen.
I will start my journey to being out of debt on __________ (insert date).
Congratulations on taking the time to read my questions and answer them. I'm proud of you. Now let's continue working on getting out of debt!