You shouldn't actually smash your cards.

You shouldn’t actually smash your cards.

This isn’t ever going to happen without effort. Never! So it is time to get off your butt and do something about your debt! For the next month, you are going to make a sprint with your finances and paying of your debt!

The first step you need to take in this sprint is to list every piece of debt you have – credit cards, payday loans, student loans, auto loans, mortgage, etc… When you list them, write down the amount and the interest you are paying on each loan. At this point, it is a good idea to get an idea of your money situation, so for your own knowledge, gather up the amounts of money you have saved different places. Also, for the next month, you need to track what you make and what you spend.

If you’ve only got a mortgage or no loans, you’re doing great! You can skip the rest of the crushing debt posts because they really don’t apply to you, but stay tuned because more posts will be coming! If you’ve only got student loans or auto loans, you can probably skip the rest of this post too, but you still need to pay off that debt!

For everybody else, once the list of debts is made, you need to pick one to start paying off. Many people recommend different loans to pay off first, but here is my opinion: pick the debt with the lowest balance on which you are paying higher than 15% interest or a payday loan with the lowest balance. If you don’t have any debt with that high of an interest rate, pick your debt with the highest interest rate. Focus all of your energy on paying the debt you choose while building a small emergency fund and maintaining minimum payments on everything else.

But how the heck am I going to pay off this debt and save money for emergencies? And how much am I supposed to save in the emergency fund?

For the emergency fund, start out with just $500 – you’re going to add more to that later, but for now just start out with $500. Where are you going to get money for an emergency fund and to pay off debt?

I told you it is a sprint, right? You’re going to keep busy this month. If things aren’t absolutely necessary to buy, don’t buy them this month! No coffee this month, No alcohol this month, No eating out this month, and don’t dare take out another loan this month! Cut the very expensive things out of your grocery this month – don’t even think about buying steaks to grill! Seriously, you really need to get a handle on your debt, now!

If you have credit card or payday loan debt, you are also going to sell crap you don’t need. If you’ve got a fancy iPhone 6s+, it is time for you to downgrade – we both know that there are cheaper phones out there so make some money with a downgrade. If you have books, video games, video game systems, etc, collecting dust, sell them! BookScouter is a great place to sell books! Half Price Books is another great option. ThredUp is a good option for selling some clothes! One other option is going to your local consignment shop. Lastly, Ebay is a catch all for selling a lot of other things. These are just a few places that I would recommend because they make it easy, but a quick Google search will show up with others!

With credit card debt, you should also try to reduce your interest rates. Just by making a call, you can probably reduce your rate. Seriously, just try it! Call the number on the back of your credit card and explain your loyalty to them in a kind and honest manner. Ask for a reduced interest rate and ask for a supervisor if the first person you speak with can’t provide you a lower rate. If the supervisor won’t give you a lower rate say something like, “I think I’ll need to cancel the card after paying it off then.” Follow through and ask them to cancel the card if they still won’t lower your rate. Remember that they may have some discretion to lower your interest rate so it won’t help to be rude!

If you can’t keep up with your auto loan, down grade if you can reduce your payments. Or – if you have multiple vehicles in the house, consider selling a vehicle completely! For every extra dollar you make or save, half of it will go to your debt and half will go into the emergency fund until it reaches $500.

Try to pick up an odd job or two to earn a few extra dollars also! Remember though, just earning a few dollars by selling things this month or picking up an extra job isn’t the main key to paying back your debt! You need to change the way you live! You need to spend less than you make.

“Can’t I cheat just a little bit?” I’m not your boss, so do what you will, but I would strongly encourage you not to cheat this first month because you’ll just keep cheating yourself! If you do, make sure it only happens if you’ve made some extra money. It should only be a small fraction of the money you earn and certainly not more than $40! Ideally you’ll cheat with $0 because getting out of debt is all about changing your habits.

Hopefully you’ll manage to pay off one debt completely this month! If so, pick and start work on another debt right away!

Those of you with families or spouses, this needs to be a group effort. Have an honest conversation about this and commit to reduce your debt together!

Starting with this one month, you need to laser focus on paying down your debt. You need to be done with things that you don’t need and can’t afford! It takes a lot of work to get out of debt, so you’re going to have to sacrifice a little bit now for your future. If you’re not willing to follow through for just one month, it is going to be nearly impossible to improve your finances for the long term!