Practical Tips for Debt Reduction
Dave and Reb look at a few of the practical steps needed to break free from debt, in this week’s show. Referencing verses from the book of Proverbs, they suggest running from debt as a gazelle runs from the hand of a hunter, and a bird from the birdcatcher’s snare. (See Proverbs 6:5)
“I want to remind everyone that debt is not a sin, but it is a burden that weighs us down,” Dave says. “And we need to create that same mindset about debt, that the gazelle has about being hunted.”
In other words: RUN.
To create a debt-averse mindset, Dave and Reb first recommend “connecting with your cash”. We live in a generation where our paycheques get direct-deposited into our bank accounts. We pay with debit and credit cards. We can go through life without touching cash. But as research has shown, paying with cash actually causes us pain, and that whole interaction can be a deterrent to spending money we don’t have. (See https://morethanenough.ca/2018/05/31/it-hurts-to-pay-cash/)
Dave and Reb also suggest building an “emergency cushion” of $1000 to $2000 so that you have a place to withdraw money in times of unexpected circumstances, instead of using your credit cards. This is done by finding margin in your monthly cashflow expenditures.
“Track your spending, find up to $300 a month in your spending, and sell something to build that cushion,” Reb says. “Once that cushion is built then you take that $300 and target each credit card, credit line or car loan, one at a time.”
There is one vital detail to remember in debt repayment: spend less than you make.
“I always say plan what you spend and spend what you plan so you can find the money for debt repayment,” Dave says. “But another key is remembering and committing not to use credit any longer. The debt snowball only works when you stop using credit, and you commit to putting extra money on your debt consistently every month.”
Tune in to hear more of their conversation.