Six Things to Do Before You Start Paying Off Debt

Once you finally make the decision to get out of debt, you may be totally excited to dig right in and get started right away. But, I’m going to encourage you to pump the brakes for just a minute until you’ve best positioned yourself to begin paying off debt. Today, I’m taking about the 6 things you should do BEFORE you start paying off debt. Let’s dive in!

Commit to Never Borrow Money Again

1. Commit to Never Borrow Money Again. For anything. Ever. Again. No more credit cards, no more financing the latest iPhone, no more car payments. No taking out loans to fund the kids’ college. No more debt. Ever. Plain and simple. The only possible exception is a home mortgage. If you are serious about getting out of debt, you need to set yourself up to STAY out of debt. For good. After all, what’s the point of working your tail off to pay off tens of thousands of dollars in debt now, if you keep that credit card around and find yourself smack dab in the middle of debt just a few years from now? Don’t let all your hard work paying off debt be for nothing. Let this time be the last time you pay off debt, once and for all. Commit—really commit—to getting and staying out of debt forever.

Temporarily Stop All Retirement Contributions

2. Temporarily Stop All Retirement Contributions. Temporarily stop all retirement contributions if it will take less than 18 months to become debt free. This is a controversial suggestion, and quite frankly one many people may disagree with. But, it’s one recommended by Dave Ramsey, and a step I have personally followed on my own debt free journey.

During your financial journey, to have the greatest and fastest success, you need to focus all your efforts on a singular goal. That means, you shouldn’t divide your attention and dollars between saving for retirement and paying off debt and saving for emergencies and saving for college, and all your financial goals at once. Instead, focus on one goal at a time. When you’re ready to begin paying off debt, focus with intensity on that goal. Throw every dollar at that debt until you are completely debt free.

Remember, you are temporarily stopping your retirement. You aren’t stopping your retirement contributions forever, only as long as it takes you to pay off your debt. When your retirement contributions are stopped, you’ll have more money to throw at the debt and you will reach your goal faster. Plus, knowing that you aren’t contributing to retirement while you’re paying off debt may help you stick to your guns to get that debt paid off as faster than you would if you were continuing to contribute to retirement.

While your retirement contributions are suspended, attack that debt with a vengeance. Nothing else matters. Make it your top priority.

Get Current on All Bills

3. Get Current on all Bills. Before you can begin attacking your debt, you need to get current on all your bills. If you are behind, often the reason is because you are living beyond your means. Stated another way, you likely don’t make enough money to cover your monthly expenses, and for that reason, are falling behind. This can be overwhelming, but you CAN dig yourself out of this hole. Here’s a brief plan of attack:

• STEP ONE. Make a list of all the bills you are behind on, including totals. Prioritize which bills you will focus on paying first. Food, rent/mortgage and utilities come first. Then make sure you have transportation, so your car payment should come next.

• STEP TWO. Cut all unnecessary spending while you get caught up (cable, satellite radio, monthly subscriptions, gym memberships, going out to eat, etc.). This is where you will have to brutally slash spending. Cut every single thing you can.

• STEP THREE. Increase your income. Consider selling things, taking a part time job, or working some overtime to increase your income.

• STEP FOUR. Work out a plan to get current. Using your budget (see below—if you don’t have one, you need one. ASAP), determine how much extra you can send to your creditors. Consider calling them to see if they can work with you. You’d be surprised how much you can accomplish by simply asking.

Save up a Mini Emergency Fund

4. Save up a Mini Emergency Fund. It is so critical to have an emergency fund in place before you begin paying off debt. Without an emergency fund in place, most people will be forced to turn to credit cards and loans to cover any emergencies. And remember point number one, above? You are done with debt. You are no longer borrowing money ever again. Ever. Again.

At a very minimum, save up $1,000 in a mini-emergency fund before you begin attacking your debt. Again, this is what financial guru Dave Ramsey recommends. But, I’d even go so far as to recommend you save up a month’s worth of expenses. Yes, it may take some time. But, $1,000 won’t get you very far in any crisis. Often times, it’s not enough to cover a monthly mortgage or rent payment, let alone anything else.

Whatever amount you decide on, make sure you save it up BEFORE you begin paying off debt. It will be the difference between an emergency being a catastrophe or a minor inconvenience during your debt pay off journey. And let’s all be real here—emergencies are going to happen. That’s just life. Be prepared to handle them without digging yourself further into debt.

RELATED: Protect your Emergency Fund with Sinking Funds.

Prepare a Written Budget

5. Prepare a Written Budget. A budget is my NUMBER ONE RECOMMENDATION for getting out of debt and succeeding financially. I honestly don’t think it’s possible to succeed financially without one. It’s how my husband and I paid off $68K in student loans last year alone. In terms of debt repayment, your budget will help you identify where all your money is going, where you can reduce spending, and how much extra money you can send to debt each month. I use the zero-based budget method of budgeting, and it will seriously change your life.

Determine Your Why

6. Determine Your Why. There will be times during your debt free journey when you are unmotivated, undisciplined, and quite frankly, just want to give up. When this happens, I want you to think back to this Step 6, your “why.” Why are you paying off debt? Do you want to quit your day job? Launch a business? Stay at home with the kids? Be able to travel the world? Get rid of your commute? Retire early? Give your kids a better future? Stop feeling so stressed about money? Spend some time thinking about WHY you want to pay off your debt. Something led you to this page—what was it? Whatever the reason, focus on it. Write it down. Put it where you can see it every day. On your bathroom mirror, the fridge, a slip of paper in your wallet. Look at that reason every single day. Remind yourself WHY you are putting in all this hard work. Because it’s not for nothing; it’s for something. Something beautiful and amazing and meaningful to YOU. And when you get discouraged and want to throw in the towel, come back to your why. Over and over again, come back to it. Remember it. And then, slowly, bit by bit, day by day, with repeated consistent effort, make it happen. MAKE. IT. HAPPEN.

And there you have it, friends. I hope these tips will set you on the right path before you start paying off debt! Have you done any of these steps? Let me know in the comments below! Tell me your why, tell me you’ve made the commitment to never borrow money again, tell me how you’re saving your emergency fund, and how hard it was to complete that first budget, but you did it anyway! I want to hear all about it!

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