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7 Easy Steps for Debt Free Living

7 Easy Steps for Debt Free Living

Let’s get real!  Debt is not attractive to a woman’s bottom line!

A 40-year-old client came to me with a $50,000 salary, $40,000 in credit card debt, and a big mortgage. Annie was recently divorced with two children and she wanted to know how to turn her life around once and for all, get out of debt and begin investing for her children’s education.  In addition, she wanted to change careers, find a job in what she said was her true calling (fashion design), and make more money.

Annie, like many women, said she awakened each morning to dreaded thoughts of oppressive debts, which sapped her energy and self-esteem. She was tired of this life and was ready to make a commitment to change. Annie had one essential quality…she was willing to follow direction. I agreed to help her rebuild, to go from debt to prosperity on the condition that she would patiently follow a powerful, yet simple, 7-Step Plan.

She did!  She got results! And you can too.

The bottom line:  Get out of debt the same way you got into debt—one transaction at a time!

Here are seven easy steps that you can begin today. As you check off and accomplish each one, you’ll be on your way to a DEBT FREE LIFE!

Step #1:  Create an Emergency Fund

An emergency fund is for events that are unforeseen that can shake your world: a car accident, a loss of a job, an unexpected pregnancy, and the list can be endless. It’s not a matter of if surprise events will happen; it’s simply a matter of when they will happen.

Action:  Allocate a minimum of $1000 and open a savings account.

Establishing a basic emergency fund will keep life’s twists from turning into new debt, even while you work off the old debt. If a real emergency happens, you will  be able to cope. This is the first step in conscious financial stewardship and self care. Yet it takes discipline not to spend it on every day bills. An emergency fund is for emergencies!

NO more borrowing! It’s time to break the cycle of debt.  (Sorry to be tough, ladies, but a sale on shoes is NEVER an emergency!)

Step #2:  Pay Off All Debts with a “WIN System”

You can sustain any plan as long as doing it makes you feel good!  You will need some quick WINS right away.  First, list your debts, excluding the house, in order of size.  Begin your personalized WIN System: pay the smallest balances first!  Each payment eliminates an entire line item, shortening the list, and this helps you to stay pumped up about getting out of debt and moving toward the financial freedom you really want.

Paying off debt is not always about numbers. It’s about feelings.  By starting with the easier debts, you will see results and you will stay motivated to empty that page. Each payment can add to your esteem of becoming debt free. That will FEEL awesome!

Action:  Each item you pay, consciously bless the good that you previously received by making that original expenditure. Breaking the cycle of debt is equally about breaking the cycle of self-condemnation. Say to yourself, “I’m grateful I had the privilege of using credit at a time of need”. This is very powerful. Now you can choose to feel good about completing an agreement you made to pay.

Action:  As you write each check, stop and think for a moment on how it will FEEL to be debt free….FEEL each payment giving you a sense of accomplishment…each one is a transaction in the direction of your new dream….allow yourself to feel incrementally more free!  This is a PROCESS…It will come.

Step #3:  Build a Foundation Fund – Saving 3 to 6 Months of Expenses

After completing steps 1 and 2, you now are building some serious momentum. You can now lay the groundwork for a solid financial foundation.  This is the moment in which most people are tempted by their emotions. They want some relief from austerity!

“I NEED those Gucci shoes”, or “I’ve gone long enough without, I DESERVE that vacation in the Bahamas”, as if these things are necessary.  But they are not. What’s necessary is building a solid foundation.

About this time, other people want to begin investing immediately. Don’t start throwing all your “extra” money into investments quite yet. It’s time to build your Foundation Fund. Ask yourself, “What would it take for me to live for three to six months if I lost my income?” Your answer to that question is how much you should put aside into your Foundation Fund.

Action: Have an open discussion and agreement with your spouse that this fund is not to be touched unless an incident arises that would have a MAJOR impact on you or your family.

Action: Put three to six months of expenses into a money market or cash equivalent savings account.  Be sure you differentiate in your mind – this is not a fund for investment purposes. Take no risk with this money. Think of it as “insurance” – a solid foundation that will be there for you, upon which you can build your dreams.

Step #4:  PYF – Pay Yourself First!  Sock Away for Your Retirement and Save Taxes too!

When you reach this stage, your major expenses are probably the house and car.  Now it’s time to get serious about building wealth.  The best way to do that is to PYF – PAY YOURSELF FIRST!

That means socking away the allowable amounts into tax advantaged accounts for your retirement, tax free!

Invest 15% of your household income into Roth IRAs and pre-tax retirement plans.

  • Don’t invest more than that because the extra money will help you complete the next two steps: college savings and paying off your home early.
  • Don’t invest less than that thinking you need to care for others first. There must be balance between self care and generosity.  Your child’s college degree won’t feed you at retirement. You can build in some parameters so you can do both in a balanced way.

Step #5: College Funding for Children

By this point, you should have already started step #4—investing 15% of your income—before saving for college. Whether you are saving for yourself or your child to go to college, you need to start now. The best way to save for college is with Education Savings Accounts (ESAs) and 529 plans. Remember, college is possible without loans!

In order to have enough money saved for college, you need to have a goal. You will need to have a monthly savings plan and an investment plan that grows your money over a sufficient number of years.

Action: Connect with an investment professional to understand what investments will best grow your money net of inflation. Begin early!

Step #6: Pay Off Your House Early

As you continue building for your future, your next step is to pay down the mortgage by paying at least an extra principle payment every year. You are getting closer to realizing the dream of a life with no house payments. Many people argue for long-term mortgages in a high inflation environment because the value of each dollar depreciates. However….it is still DEBT!

Action: As you pay this last debt, blessing each payment, feeling grateful for your home, you will gain momentum much like you did back in Step 2, using the WIN System!  Remember, having absolutely no payments, a debt FREE life, is totally possible for you!

Step #7: Build Wealth and Give!

It’s time to build wealth and give. Invest wisely. Learning how to be a great steward of your wealth can be a life-long skill and passion.  Find ways to fuel your own passions so that you can have, be, do, and give to fulfill your own destiny.  Consider leaving a legacy….an inheritance for future generations, or a gift to a non-profit cause that expands your good feelings about yourself.

Be wealthy both in money and in spirit. Give and to you much shall be given!

Today, Annie is debt-free, has a new dream job, has a college fund, a savings fund and even an investment account. You, too, can do this.

Have the life you love! Be Debt-free! Be Prosperous!

“You’ve come a long way, baby!”

 – Lynn Kitchen is a successful Certified Life Mastery Consultant, Professional Speaker, Trainer and Financial Coach helping women to get results in making their life’s goals and financial dreams come true.  Lynn Kitchen was one of the first women to own her own Investment Broker Dealership and Investment Advisor Firm. She brings 34 years of financial experience, as well as 10 years of spiritual practitioner experience to her clients.

The Four Dames is a collaborative coaching company that empowers women to create a life of freedom, purpose and fun, which specializes in the areas of Health, Wealth, Love and Purpose. Click here to receive 2 free MP3’s on The Abundant Life, and Living by Conscious Intention. 

The above “Pearl of Wisdom” is LIVE! It has been shared directly from the content in the current ongoing weekly course that The Four Dames teach – a life changing, transformational course designed to provide structure and weekly support for women who know they have treasured gifts to offer the world.

If you want more freedom in your life…if you are ready to take your dreams and hopes off the drawing board and into reality, then join our league of women who, together, are making a difference!  Please LIKE us on Facebook, and Follow us on Twitter!

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