5 Steps to Becoming Debt Free in 2019

Follow these simple steps to get yourself organized and on your way to paying off your debt.

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When you’re in debt it’s much harder to be financially successful because so much of your money will need to go to making payments and paying interest. The sooner you can get your creditors off your back and become debt free for good, the better, as you can then divert all that wasted cash to doing big things.

Becoming debt free is easier said than done, especially if you have substantial credit card debt. The good news is, there’s a proven path to freedom from debt. If you’re ready to make 2019 the year that you kiss your debt goodbye for good, follow these five steps.

1. Stop getting deeper into debt

Before you can dig out of a hole, you need to stop digging it. If you’re ready to become debt free, it’s imperative you stop going further into debt. Commit now to no longer using your credit cards or otherwise borrowing any more money that you can’t pay back in full right away. You’ll need to be able to live within your means if you want to become debt free.

2. Save a small emergency fund

It may seem odd to devote extra cash to saving an emergency fund when your goal is to pay down debt. The problem is, if you don’t do this, it will be impossible to commit to not relying on debt any more. That’s because emergencies will happen, and you’ll be stuck borrowing to deal with them if you don’t have some cash set aside.

While you’ll ultimately want an emergency fund with three to six months of living expenses saved up, you shouldn’t try to save this much before working on making extra debt payments. You should, however, have a mini emergency fund of between $500 and $2,000 -- depending upon your income and the likelihood of an emergency.

Prioritize saving this emergency fund ASAP and just make the minimum payments on your debt until you do. That way when something unexpected happens, you won’t have to break out the credit cards and lose your momentum by getting deeper into debt after you’ve been working hard to pay it off.

3. Make a budget and set aside extra money for debt repayment

To become debt free, you’ll need to throw extra cash at your creditors. Which means you have to find money to do that. The more money you can find, the sooner you’ll successfully pay off what you owe.

Start by tracking your spending for around 30 days to see where your money is currently going. Then make a detailed budget that accounts for every dollar of income -- and make extra debt payments an essential line item in your budget. If you can’t find spare cash in your budget to pay debt, you’ll have to cut other expenses or increase income by doing overtime or taking on a side gig.

4. Use the debt snowball or debt avalanche method to pay down your debt

Once you’ve found extra cash in your budget, you need to allocate it appropriately. In other words, you need to decide which debt you’re going to make extra payments towards.

It’s best not to spread this extra money around towards all your debts, but instead to devote all your extra cash towards paying off one particular debt ASAP while making minimum payments on others. There’s two different approaches to deciding which debt to make extra payments to: the debt snowball and debt avalanche.

The snowball method of debt repayment says to pay off your smallest debt first, then roll the payments you were making on that small debt over to paying your next smallest debt. Continue doing this until all debts are repaid. The avalanche is a similar approach, but you start with the highest interest debt instead of the smallest debt.

The debt snowball method has been proven to work because scoring wins by paying off debt keeps you motivated. The avalanche method makes more financial sense, however, because you pay less in total interest over time by paying off your highest debt first. You’ll need to decide which approach is best for you.

You could also potentially take out a personal loan to consolidate all your other debt -- if you can qualify for a loan at a low rate. This would mean you’d have to focus on just paying back one debt instead of many.

5. Track your progress to stay motivated

Finally, once you’ve started your debt payment plan, keep track of how you’re doing so you’ll stay motivated and eager to send extra money to debt repayment. You can monitor your progress using apps or a spreadsheet, or make a visual representation of your debt such as a thermometer picture you color in as you get closer to being debt free.

You can also keep tabs on your credit report to watch your debt balance go down, and your credit score go up as you make on time payments and reduce your debt balances.

You can become debt free in 2019.

By following these five simple steps, 2019 can be the year when you either pay off your debt for good, or get a lot closer to doing so. The important thing is to make a commitment and stay motivated until your very last payment is made. It may be a long slog, but it will be worth it in the end.