2 Steps to Paying off Debt

When you're trying to live within your means, or live well within your means, in order to pay down debt, there are two parts to the process in my mind. 

Making Money and Spending Money. 

This seems elementary, but let me explain. 

Making Money. The amount of money you make directly relates to the amount you can spend or pay off. If you want to pay $2,000 of your debt off each month...but you only make $1,500 a month you need to make more money. That may not be changing jobs, it may be working harder at the job you have and asking for more responsibilities and pay. It may be finding ways to make money elsewhere, selling things you have, or picking up a part-time job. 

Spending Money. The next part is spending. Spending money is inevitable. BUT you don't have to spend as much money as you think, and you're probably spending way more money than you realize. If you're making $2,000 a month and you want to pay off $1,000 of loans each month...then you CAN do it, you just have to figure out how. Cut back on things, move to a smaller place, watch your grocery and gas bills, be aware of your spending and stop wasting money. If at the end of the day you can't cut back any more (have an independent person look at this and see if there are things you are missing first), then go back to Making Money and find out how to make more to reach your goal. 

These two concepts are the key to what Kevin and I have achieved thus far. We work multiple other jobs, which allow us to have sometimes thousands of dollars extra a month. If we watch where we are spending that money, then we have more to pay on loans.

Not one of these steps is more important than the other! That is key. I have clients come in that make $250,000 a year...but manage to have that same amount or more in debt. They make plenty, but they spend twice as much as they make. The same goes for clients that come in not wanting to get a full-time job because they don't feel like it, or think they can't because they are too busy. They may have a good handle on spending, but they aren't making enough to cover the basics. You have to balance both in order to succeed at paying down debt. 

This is not rocket science. We are not paying our debt down quickly because we are smarter, luckier, or able to work more than other people. We just prioritize differently. We decided these past two years, that making as much money as possible...and spending little in our regular lives, was our priority so we could put everything else towards our debt. However, we've also decided a few things have moved to the top of the list every now and then, like a trip, or a new camera or computer to help us in our steps to making more money!

I do believe each person struggles with one or both of these steps. Before we were married, I did a great job making money...but spending it was my problem. I shopped a lot, but always worked plenty of jobs so I would have plenty of money to spend. When we had to start paying on our student loans, I had to learn to stop spending so much. Kevin is the opposite, he rarely ever wants anything, but he wasn't like me where he worked all through college. He waited to get his first job until graduation, so when we were first dating he wasn't able to buy much, because he didn't work.

We are by no means perfect examples, but with work and thought...the two steps become a bit easier over time! You don't need to take an expensive class on getting out of debt, or read a bunch of books...just follow the basic 2 steps to having more disposable income in your life to put towards your highest priority items. Classes and books are great, and are there for you when you want to take the basics of money management above and beyond!