To get started on your journey to payoff debt and have financial freedom, you have to start somewhere.
After you find your why, the most important step is something that many people overlook as they try to get out of the weeds. Take a step back and look at the bigger picture by actually tracking your debt using a debt tracker spreadsheet.
How much debt do you actually have? Can you answer that simple question with an exact amount? No? Don’t worry, at one point I couldn’t either, and then I realized I needed to take control over the largest source of stress in my life and finally get out of debt.
start with a debt tracker worksheet
Back it up…how do I know you have debt? Because I did, and most millennials do thanks to *drum roll please* student loans. Because of those student loans, you might also have other debt too. If it’s not student loan debt, the majority of Americans have other debts like credit cards or car payments. Some types of debt are better than others, but debt is debt.
I know how hard it is to suck it up and look at what your total balance is. Between my husband and me, we had a whopping 140K+ of student loan debt. The only upside? At least it was because of two undergrad and three grad degrees between the two of us, so we got some bang for our buck, but still!
You can’t start on this journey to financial freedom until you know how big of a hole you need to dig yourself out of. It can be very eye-opening to see the total number in front of you. And exactly what you need to move forward.
No matter how high your debt is, you will want to take a step back and break it down into chunks. Rome wasn’t built in a day as the saying goes (okay, okay…I think I’ve used enough puns/metaphors/whatever for one post!). But you can’t break it down if you don’t even know what you are dealing with.
Once I was able to lay everything out on the table and see what I was up against, I was able to come up with a solid plan to chip away at that mountain of debt.
When I graduated from college and started making payments, I put my student loan debt on auto payment and let it be, which was a huge mistake! My monthly payment was over $800/month. I didn’t pay extra and I didn’t check to see how much was going to principal vs. interest.
I waited way too long to really look at this and as I continued to pay such a high amount each month, I finally took a step back. It was shocking, disheartening, and much needed to see how much was truly going toward principal.
Spoiler alert! Not nearly as much as I had thought and my balance was not really going down that much, but I had turned a blind eye to what was really happening. Learn from my mistakes.
Then I started to come up with a plan to pay off this debt ASAP! I realized that before I could come up with a plan, I had to know where to start. Once I had that figured out, in less than three years from starting to pay my loans off, they were gone and a huge hurdle and stressor was removed from my life forever.
It’s more than just writing down the total debt
To be able to come up with a plan, you also need to include more details about those debts to make a plan. That other info on your debt tracker? Interest rate, minimum monthly payment, and, most importantly, which debt is going to be your number one priority.
I suggest re-doing the debt tracker spreadsheet each time you pay off a debt or a group of debts (ie. student loans) to re-assess how much you owe and to re-evaluate your financial motivation for the next step. You might realize that your why may have shifted and that’s okay, but
It’s so important to know not only how much you owe, but how much of your paycheck is going toward debt each month. And when you can see which interest rate is the highest..well, you know where to start on your debt avalanche.
Not sure how to format this? No worries, I have your back 🙂 Download your free debt tracker spreadsheet below to get started!