One of the number one reasons people are afraid to leave their full time jobs is often tied into how much debt is hanging over their heads. I understand what you’re dealing with here. When my husband and I first got married, we were young (only 20) and broke. We desperately needed furniture and that 6 months same as cash offer sounded perfect for us. We filled up our little apartment with shiny, new items and set about playing house.
Unfortunately, we quickly realized that the monthly payment on that furniture was killing us and the interest rate that would kick in after only 180 days was so high that we might as well have put it all on a credit card. There was no way we could afford to pay it off in 6 months and I’m sure the furniture store was well aware of that. They have to make money somehow after all.
As with most things if it sounds too good to be true, it probably is. We learned a valuable lesson from that experience. You may have found yourself in a similar situation, you might even have some student loans and a hefty car payment on top of it. Whatever your debt is, it is like a weight holding you under water. You probably feel like you’re drowning.
How to Escape Debt
Fortunately, there people a lot smarter than me about finances who have come up with excellent ways to climb out of that debt pool. Once you do that, you can more easily pursue your dreams of working for yourself without the fear of having to declare bankruptcy, lose your car, or struggle to make ends meet quite as hard.
Dave Ramsey is one of my favorite financial gurus. I think Dave looks at things in a very practical way and understand that we need to see some progress when paying off debt or we’ll give up. One of his best examples in how to start attacking your debt is his “debt snowball.”
In a nutshell, Dave says to take the debt you owe the least on first and throw everything you can at it. Get a part-time job, have a garage sale, put birthday and Christmas money gifts on it. Get that small debt paid off and then move to the next one.
You might think it is smarter to pay off the highest interest rate debt first, and that is a good strategy, but Dave has been in debt and he knows how our minds think. When you see one bill slashed and paid off, it motivates you to pay off another one and so on.
I would just add that if you have two separate bills that are very close to each other in balance, pay off the higher rate one first, because on paper it is a little smarter.
Of course, the best thing to do is to avoid debt in the first place. However, you may just need to learn how to avoid getting in debt again. Here are some tips that will help:
- Live within your means. If you make $30,000/year, you need a modest home or apartment, are probably going to have to drive a used car that is paid for. Make sure your bills are covered each month, that you have an emergency fund, and then save as much as possible.
- Nothing is free. Avoid those zero interest deals like the plague. Either they make the terms so difficult that you will send a payment in at the wrong time and incur penalties, or an emergency will happen and you won’t be able to pay it off before your zero interest time period is up.
If you want to escape the rat race, you’re going to have to figure out a way to live frugally for now. Consider moving in with a parent, renting a room from someone you know, or otherwise living extremely modestly for a short time so you can have more freedom later in your life.