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Debt Reduction Q & A
William Blake answers your debt reduction questions "William, Is It Possible To Get My
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These kind of emails are pretty typical of the kind of messages I receive regularly. People realize they need to get their debt paid off, but they just can't see the light at the end of the tunnel.
Does that ring a bell?
Well, to respond to today's question, I've got some bad news, some good news and some even better news.
First, the bad news. The bad news is that the lenders who you owe money aren't interested in what's best for you. They'd like nothing more than to have you paying them for as long as possible, since they'll be making lots of interest off your debt.
Secondly, the good news. The good news is, I'm going to share the entire nine-step system in an abbreviated form in this Q & A session. You won't need to buy a thing, just keep reading the article below.
Thirdly, the even better news. At the close of our Q & A session today, I'm going to explain how you can get your hands on the original Debt R.E.D.U.C.T.I.O.N. System in its entirety. (That's right, all 26 lessons, mindmaps, checklists, worksheets and more!)
So let's go ahead and get started as I share a simple system for getting your debt paid off faster, with much less interest paid.
Here's How To Get Your Debt Paid Off In Nine Steps
"Loans and debts make worries and frets."
Have you ever heard that saying? Chances are you have heard it or something like it many times.
In fact, if you had a dollar for every time you heard something like that, you might not have to worry about your debt now! :-)
However much of a cliche it is, it IS a truthful statement. Loans and debts REALLY DO make worries and frets - and just increase your stress level in general.
The simple fact is, if you're dealing with a pile of debt, the chances are pretty good that you are stressed out and looking for a way to end your stress.
Getting out of debt has many parts. Consider words like "budgeting", "saving", "overspending", "credit cards", "consolidation", "counseling", "debt management", "debt settlement", "negotiation", along with a pile of others, and it's easy to see why people get stressed out and don't know where to start.
There are many parts to getting out of debt, but I believe there is only ONE system. So it's not "my" system - it's THE system. People who get their debt paid off and free themselves from the stress all use the same basic system. Some might do it better than others, but they all follow pretty much the same process.
I'm going to explain this system to you in my own proprietary way that no one else on the planet uses. And as we go through each step, I'll discuss them and share some tips that are also exclusively mine.
I call this system the "Debt R.E.D.U.C.T.I.O.N. System" and I used it myself to pay off over $100,000 in debt, more than half of which was on credit cards. (Yes, there are five zeroes in that number!)
If you can master these nine steps, you CAN and WILL get your debt paid off sooner than you think. And think about how nice it would be to wake up one day knowing that all your debt is paid, and you are finally free.
The components of the Debt R.E.D.U.C.T.I.O.N. System are...
R - REALIZE there's a problem
E - EDUCATE yourself
D - DECIDE to get out of debt
U - UNDERSTAND what got you into debt
C - CREATE a plan of attack
T - TAKE action
I - INVITE challenges
O - OVERCOME obstacles
N - NEVER get into debt again
In the rest of this lesson, I'll explain each of these nine steps. So let's get started...
R - REALIZE there's a problem
The first step to getting out of debt is realizing that there's a problem.
I know it sounds obvious, but a lot of people don't connect the fact that they're in debt with the problem that led to it.
For most people, the problem that led to being in debt is overspending, plain and simple. The credit card companies do a very good job of convincing us that we should just charge the things we want but can't really afford.
People get accustomed to instant gratification and start charging more and more. Until the debt catches up with them, at least.
The fact that you're reading this means you've probably already realized that there is a problem that you need to solve, but you need to really look at what led to your debt and identify the problem if you hope to avoid it in the future.
E - EDUCATE yourself
Step two in the Debt R.E.D.U.C.T.I.O.N. System is to educate yourself about debt and money.
This doesn't mean you need to spend 4 years in university to get a degree in finance. It simply means you need to learn how debt really works.
You need to understand the system that's "behind the curtain"...
- The minimum payment trap. How making minimum payments can take you up to 20 years to get your credit cards paid off
- How much things really cost. The real cost of something after you pay all the interest on it on top of the original purchase price.
- How a budget frees you, not restricting you. Most people think a budget limits them, but it's really the other way around. In lesson six of the Debt R.E.D.U.C.T.I.O.N. System I'll talk more about creating a budget that will help you free up your money to pay off your debt faster.
The important thing is to "think for yourself" - don't let the credit card companies and other lenders tell you what you should believe.
That's an important point, so let me say it again in slow motion...
- Think
- For
- Yourself
Getting out of debt is up to you - nobody is going to do it for you, least of all the companies who gave you credit.
D - DECIDE to get out of debt
Step three of the system sounds really, really simple, but it's THE most important part of the whole process.
You need to decide to get out of debt once and for all.
Hoping to get out of debt isn't enough. You need to make a conscious decision to be free of your debt, and stick with it no matter what. Otherwise, you'll be right back where you are now, probably sooner than you think.
U - UNDERSTAND what got you into debt
Step four is closely related to step one. If you want to get your debt paid off, and keep it that way, you're going to have to understand what got you there in the first place.
If you don't understand what got you to where you are today, even if you get all your debt paid off the chances are pretty high that you'll wind up back in debt, wondering what went wrong.
Let me just give you a quick example:
A friend of mine cut back on all the frivolous things in her life, and scratched and saved every extra dollar she could to pay towards her debt. And she managed to get all your credit cards and other debts paid off...
- The first thing she did was "reward" herself for a job well done. You know how? By taking a nice trip, which she charged on her now-clear credit card.
- She also went back to her previous lifestyle, buying things she wanted "now" instead of waiting until she had the money in hand.
- Before she knew it, she was back where she started - in debt and stressed out.
She fixed the problem and got out of debt, but it was only a bandaid fix for the bigger problem.
She didn't truly understand what got her into debt in the first place.
C - CREATE a plan of attack
Step five is where you really start to make headway.
This is where you sit down with everything you've come up with in the first four steps and lay out your plan for getting your debt paid off.
- Your budget
- The problems that led to your debt
- Your goal for becoming debt free
- The changes you're going to make to reach that goal
You'll need to work out exactly how much you can pay towards your debt every month to get it paid off sooner (this is where your budget will come in handy).
This is also the step where you will "find" money that can be used to pay off debt every month, even if you don't realize you have it right now.
Revealed: I've got a simple little technique that you can begin using right now to find money for an extra payment at the end of this month. (I first shared this in my 5 Day Email Course Operation Money-Find: How To Find Money To Start Paying Off Your Debt This Month. Click here to find out how to get your own free copy.)
Here it is: For the next 7 to 14 days, make a list of everything you spend money on. It doesn't matter if you use cash, credit card or debit card, it goes on the list.
Once you have a few days worth, go through the list and find all the things that are not absolutely necessary. Add up how much you spent on it over the course of a week.
Pick as many as you can manage, and stop spending your money on them. Put that money aside for the end of the month, when you're making your bill payments. Now take all that found money, and make a payment on one of your bills.
Sounds too obvious? I'm telling you the truth, this one single tip will cut years off your debt if you put it into action.
Now, having said all of that, in lesson two of the Debt R.E.D.U.C.T.I.O.N. System, I'm going to share 13 simple ways to find extra money every month.
I've worked with people who have come up with as much as $437 that they could use to pay off debt at the end of the month - and every month from then on.
I'll share those tips and how YOU can use them to make an extra payment on your bills every month until they're paid off.
Now, onto the "T" of our system...
T - TAKE action
Step six is where the "rubber hits the road" so to speak.
All of the planning and goal setting means nothing until you take action and put your plan in motion.
You've done the work to learn why you're in debt and identify the habits you need to change. You've made the conscious decision to get yourself out of debt, and you've created your plan of attack.
Now it's time to implement your plan.
For example, let's take a closer look at the technique I shared in the previous step.
You've started to track your spending and identified things that you're spending money on that aren't really necessary. Here's how you take action on that information...
- Take your list of unnecessary expenses and add up the total cost per week.
- Now multiply that amount by four to get your approximate monthly "found" money.
- Choose one of your debts that you want to pay off. I recommend choosing the smallest one, NOT the one with the highest interest rate.
- When you make your payment on that bill at the end of the month, add the "found" money to it.
- Continue to do this every month until that bill is paid off.
Why do I recommend paying the smallest debt first, instead of the one with the highest interest rate?
It's simple, really - when you pay off the smallest debt first, you'll see quicker results. When you get that first debt completely paid off, it's a fantastic feeling.
If you've done any research on debt reduction, you've probably seen people who recommend paying off your high interest debt first, to save more money in interest costs.
While that might make sense from the point of view of someone on the outside looking in, believe me when I say there's nothing more exciting than getting that first debt completely paid off.
I cover the reasons behind working from your smallest debt to your largest in several lessons of the Debt R.E.D.U.C.T.I.O.N. System - lessons #2, #3 and #13. I believe it's that important.
Okay, let's move on to the "I" in our system...
I - INVITE challenges
By this point, you might be thinking "William, this sounds great but I don't think it's going to be that easy."
Listen, I understand completely. Changing the way you do things, and learning to give up some things you enjoy isn't as easy to do as it is to say.
That's why step seven in the Debt R.E.D.U.C.T.I.O.N. System is to "Invite" challenges. Challenges are going to come up whether you like it or not, so I believe you need to prepare yourself for them by expecting them and even inviting them.
You see, since those challenges are bound to come up anyway, you might as well get them over and done with sooner rather than later.
Every challenge you overcome is like another notch on your belt - you're that much closer to being debt free.
And part of inviting challenges is to overcome things that could come up unexpectedly.
Let's continue on to the "O" in our system to see how to deal with these things...
O - OVERCOME obstacles
Inviting challenges is one thing, but the really critical part is taking those challenges and overcoming them.
Let me give you an example...
Let's say you're several months into your debt reduction plan, and things are going well. You've managed to pay off two of your smaller debts and you're well on the way to having the third (larger) one paid off.
You're feeling great about your progress, and you can see the light at the end of the tunnel. Suddenly, your car breaks down and you're faced with a $250 repair bill that you didn't anticipate.
If you haven't prepared for something unexpected to come up, it could really throw you off your plan.
But if you're anticipating something unexpected to happen, you'll just roll with it - you make adjustments for that month and move on. Or maybe you already have an emergency fund set up (I discuss emergency funds in detail in lesson #7 of the full Debt R.E.D.U.C.T.I.O.N. System) and can easily cover the repair cost without a hitch in your debt reduction plans.
The important thing to remember is that you're not going to be able to predict and plan for every possible challenge.
The key is that you understand that there will be challenges and, most importantly, you can overcome them without getting completely off track with your debt reduction plans.
And that takes us to the final part of our system - the letter "N"...
N - NEVER get into debt again
Getting your debt paid off is a great feeling, but some people reach that goal and then they slip back into their old habits and wind up back where they started (remember the story I told you earlier about that friend of mine who paid off her debt and then racked it right back up?)
Part of my system is making a conscious decision to never allow yourself to get back into debt.
Overspending can be an addiction for some people, just like alcohol and drugs. Those people may need to consciously decide not to buy things on credit, even years after they have stopped doing it and got their debt paid off.
For other people, their new spending habits can become second nature fairly quickly and they may not even have to think about it once they've paid off their debt.
You'll know whether you fit into one of those categories or the other (or somewhere in between) soon after starting your debt reduction plan. (You probably already have a pretty good idea, in fact.)
But wherever you fit, you need to decide that you're not going to buy things on credit or allow your debt to pile up again once you get it paid off.
That might mean you have to cut up most of your credit cards so you can't use them anymore. You might even consider canceling them completely, although that isn't always the best idea - it can have a negative effect on your credit score in some cases (lesson #5 in the Debt R.E.D.U.C.T.I.O.N. System explains in detail how your credit score is affected by credit cards and other debt).
That also doesn't mean you never want to have any debt in the future. Debt can even be a good thing in some cases, as long as you control it and not the other way around. And there are some things that you often have no choice but to go into debt for - a mortgage on a new house is probably the most common example.
The key point you need to remember is this...
If you have debt, it needs to be debt that you can control
and that you have taken on with a full understanding
of how you will manage it and how you will pay it off.
And remember - credit card debt almost never fits into that description.
So there you go - I've just handed you the exact system I used to get myself out of debt. I call it the Debt R.E.D.U.C.T.I.O.N. System.
The Results Are Worth Getting Excited About!
I've seen some phenomenal results from using the "system". It got me from over $100,000 in debt to completely debt free, and it has worked for many other people as well.
Like I said at the beginning of this Q & A session, this same system is used by many people, I've just put it together in my own proprietary way.
If you'd like to find out more about the full Debt R.E.D.U.C.T.I.O.N. system, including all 26 lessons, the checklists, the mindmaps, the worksheets and much more, visit the Debt Reduction Academy main page.
Or if you'd like to get hold of your own copy of my 5 day mini course "Operation Money-Find: How To Find Money To Start Paying Off Your Debt This Month" just enter your name and email address into the space below.
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Free 5 Day Mini Course
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* Every effort has been made to accurately represent this course and its potential. Please remember that each individual's success depends on his or her background, dedication, desire and motivation. As with any financial endeavor, there is no certain guarantee that you will experience the same results as others have.