Are you thinking of making this 4th of July the day you declare your independence from debt? If so, congratulations! If not, consider setting that goal for yourself between now and next Independence Day.
The average credit-card debt for U.S. households stands at $15,706, with average mortgage debt at $156,333, and student-loan debt reaching an average of $32,953! In other words, Americans are having a love affair with debt. But there's a very real downside to our indebtedness. It not only takes away our independence in the present, it also severely impacts our ability to save for the future.
Getting out from underneath a mountain of debt takes time, and unless you win the lottery, there are no quick fixes. To help inspire you to eliminate the burden of debt from your life, I’ve rounded up a few stories of people who were able to successfully free themselves from debt, with no bankruptcy required. Here are three lessons to get you started on the road to financial freedom from those who sparked their own money revolutions:
1. Go on a “Selling Spree”
The story: Lane Fournerat, one-half of a married couple with $70,000 in student-loan, car-loan, and credit-card debt, says he and his wife eliminated their debt in a little less than three years. How’d they do it? By embracing a “more minimalistic life” and using Craigslist, Ebay, and other websites to sell some of their surplus possessions. To help themselves stay motivated, they chronicled their journey on their YouTube page called “The Funnyrats.”
Their advice: “You have to know why you want to become debt-free. We all know the how (make extra money and pay your debts off), but to have a reason WHY you are going to sacrifice to make this a reality is what is going to drive you to make it to the end.”
What you can do: What I like about the Fournerats’ journey is how they “went on a selling spree” to help erase some of their debt. Think about it – we all have stuff sitting around the house that isn’t being put to good use. Why not clear the clutter and make some extra money while you’re at it?
2. Try Negotiation
The story: Kristen, a 20-something server and bartender living in Texas, broke her leg a few years ago. Unable to work and without emergency savings, she was soon evicted from her rental property, had her car repossessed, and racked up past-due balances with her cell-phone provider and utility companies. Altogether, she eventually owed roughly $8,000 to multiple creditors.
To pay it off, she called each creditor directly to negotiate settlements lower than the amounts she actually owed. “Most did (settle for less),” she said. “They took any money they could get.” She also happened to win a large Super Bowl bracket that year and put most of the winnings toward her debt. As a result, she was able to increase her credit score by 200 points in just about a year’s time.
Her advice: “It takes time. You can’t fix it overnight. But I went from collectors calling every day to people offering me loans and credit cards daily because they’ve seen what I did in one year. I’m a true rags-to-riches story – I moved to Texas with possessions that fit in two duffel bags and now have a house and two cars, all by myself!”
What you can do: Negotiating directly with creditors doesn’t always work, but it’s worth a shot. They’ll be more likely to settle if you can pay the agreed-upon amount quickly, so be sure you have the money available when negotiating. If your amount of debt is such that you’re considering bankruptcy, this is an especially good option – avoiding bankruptcy at all costs is the goal.
3. Move Back in With the ‘Rents
The story: Business Insider shares the story of Cait Flanders, who found herself $28,000 in debt at age 25. With $100 in her bank account and another $100 available on a credit card – which had to last her six weeks – she knew she had to make some changes. She moved back in with her parents for six months and significantly cut down on her lifestyle in order to pay off $10,000. Cait also funneled two large tax refunds to her debt balance and has now been debt-free for nearly two years.
Her advice: “There were no more dinners out, drinks with friends, weekend getaways, shopping trips, etc. I basically sat at home and occasionally went for a $5 coffee date with a friend. And I can't lie - it sucked! But I paid off $10,000 in those six months, so it was worth it to me.”
What you can do: The great thing about Cait’s story is how she made real changes to her lifestyle. It may not be easy to forego dinners out and drinks with friends, but all that “fun” money is even better for your psychological state when used to pay down exorbitant debt. It’s important to treat yourself on occasion in order to stay on track, but you’ve got to make the decision to get out of debt, develop a plan to achieve your goal, and then stick with it for the long haul.
Give Yourself Liberty!
Being shackled to debt is no 4th of July picnic. The constant necessity of paying down debt often means you’re not able to save for emergencies in the present, not to mention for your future retirement. By committing yourself to getting out of debt, you can improve your financial situation and overall quality of life. If nothing else, you’ll have more money to spend on the things you enjoy – without feeling guilty. Isn’t that enough motivation?
Enjoy the fireworks!
What inspires you to get out of debt? Are you planning on starting any money revolutions this year? Let us know by tweeting @Lindsey2Wealth!