Hello! Today we have a guest post on an amazing debt payoff story. If you’re interested in learning how to become debt free and earn 7 figures, our guest Jon Dulin at compoundingpennies tells you exactly how he did that. Enjoy!
Is money a stress in your life? Are you tired of never having money to do anything?
Are you tired of getting the mail, for fear that another bill is coming due?
Do you want to have more money, but you don’t know how to do it?
I was in your shoes and now I am enjoying life to the fullest.
A little more than 10 years ago I was broke. I was more than broke actually. I was in credit card debt to the tune of $10,000.
I was determined to get out, only to fall back in. This cycle unfortunately repeated itself 2 more times until I was finally able to break free.
But once I broke free, I started to make smarter choices with my money and slowly but surely, my wealth grew.
Today, I have a net worth that is closing in on 7-figures.
How did I do it? I am going to outline my process here.
One word of caution before we start. If you are looking for a solution that will rid you of your debt overnight so that you will be rolling in the benjamins by the weekend, this isn’t for you.
I take that back. This is for you. This is for you because you need to know that changing your finances around overnight is not possible.
It takes time and work. I know you probably didn’t want to hear that, but it’s the truth. There is no get rich quick scheme out there.
I know because I tried many of them and ended up in the same, if not worse, financial shape.
With that being said, keep reading to learn the process that actually works.
#1. Get To The Root Of Your Issues
Before you can make any progress towards building wealth, you need to understand why you aren’t good with money.
If you’re in debt, you need to know why. Chances are you don’t have a spending problem. You have a deeper issue.
For me it was depression. Once I admitted this to myself and got help, I was able to get out of debt.
If you aren’t in debt, you still need to understand why you aren’t good with money. Maybe you try to impress others and buy things you can’t afford. Or maybe you just don’t think through your purchases at first.
Whatever the issue is, you need to get to the root cause, address it and deal with it. In some cases, this will take an emotional toll on you. This is what happened when I admitted I was depressed and got help.
But as much of an emotional roller coaster it was, I would do it all over again in a heartbeat because it laid the foundation for changing how I handled money.
#2. Figure Out What You Value
Your next step is to understand what you value in life. Too many of us ignore what we value and just buy things thinking the items make us happy.
Just take a minute and think about how many times you bought something and then later regretted it. This is you buying something that didn’t align with your values.
When I was younger, I bought name brand designer clothes and the latest electronics because I thought I valued these things. But I was wrong.
I was just trying to impress others. When I took the time to understand what I valued, I realized that spending time with my friends was a main value of mine.
So we ditched hitting the bars and instead cooked dinner and played board games. It was the best decision ever.
The memories we have are priceless and we still look back and laugh. Additionally, this helped me cut my spending.
I didn’t have to cut out anything that I truly enjoyed from my budget. I simply stopped buying things and spending money on things that didn’t matter to me. And I never missed them once.
#3. Set Goals
We are making good progress, but there is still work to be done. The next step in the process is to set some goals.
What do you want out of life? If you could look back on your life when you’re old, what are the things you wished you had done?
Once you have your goals written down, forget about them for a few days to clear your mind. When you come back and read over them, do they inspire you? Do they make the hair on the back of your neck stand up? Do you get excited reading them?
If so, you know you’ve found something good.
If not, take some time to think more and come up with more ideas. Repeat the process above until you get those feelings when you re-read your list.
When you have your list, now you have to take a few minutes and make it detailed. This means write specific notes about each goal so they continue to excite you.
For example, you might have a goal of financial independence by 50. This might excite you today, but in 6 months, it may lose its luster.
But if you say I want to retire by 50 so I can travel. I want to watch the sun rise over the Grand Canyon and I want to see the clear blue waters of the tropics, this will excite you for years to come.
Finally, you need to keep your goals in front of you. They can’t be tucked away in a notebook or hidden under a pile of papers. Keep them out so you can see them.
I have a note next to my monitor to remind me. I see it countless times a day. I also have a reminder as my lock screen on my phone.
Both do a great job at helping me to stick with my goal for the long term.
Related read: How to set goals you’ll actually achieve
#4. Start Saving
Now it is time for you to start saving money. After all, if you don’t save anything, how are your finances going to improve? The simple answer is they won’t.
You have to put money into a savings account if you want to get ahead. Too many of us (including me) are more than content spending everything in our checking accounts.
So trying to get rich by keeping your money here isn’t going to work.
You need to set up a savings account and move money to it every time you get paid. Luckily, you can automate this and only have to worry about setting it up once.
The easiest option is to reach out to your employer and see if they can split your paycheck. Have a small amount go into a savings account and the rest into your checking account.
If your employer can’t do this, then you need to do it yourself. Just set up a transfer for each time you get paid. You can easily do this by logging on to your bank account.
Now, how much should you save? To make it easy, start with an amount that is small enough that you won’t notice. Try for $20 each paycheck.
Before you think this is too much, give it a chance. If on the other hand you think it’s too little, give it a chance.
If you are paid bi-weekly, you are saving over $500 a year. This is a good start. I recommend this amount because you don’t want to get greedy here.
You might think you can save $75, but in a few months will realize it is too much and will stop saving completely. By starting small, you stick with it.
And you can always increase this amount in the future. In fact, I encourage you to increase it this amount a little bit each year.
#5. Get To Zero
Now that you are saving something, you need to get yourself to zero if you are in debt. The reason for this is simple.
You can’t build wealth if you are giving all of your money to someone else!
I’ve found the best way to get out of debt is the snowball method. You organize your debt from smallest balance to largest and then pay the minimum on everything but the smallest debt.
For that debt, you put everything you can towards it. Once it’s paid off, you repeat this process on the next smallest debt.
Doing this keeps you motivated by getting rid of debt quickly.
#6. Start Investing
When your debt is gone, you’re going to have more money left over. You could take some of this money and increase your savings amount each time you get paid.
With the rest of the money, or at least a good portion of it, you need to start investing.
By investing in the stock market you grow your wealth faster.
If you were to take $100,000 and leave it in a savings account earning 1% for the next 10 years, you would end up with a little more than $110,000.
But if you took the same amount and invested it for 10 years and earned 8%, you would end up with over $215,000!
I know what you are thinking. The stock market scares you. It is intimidating and you can lose money.
You can lose money, but you are most likely to lose money in the short term or when you give in to your emotions.
By learning how to invest as a beginner, you have a solid foundation for which to build from. This will help you stay invested for the long term and thus increase your odds of growing your wealth.
This process has worked for me. I started out investing a little bit of money every month. Then I slowly began investing more.
I was growing my wealth nicely. Then 2008 came and wiped out a good portion of my wealth. I could have sold what was left and never invested again.
But I knew the stock market goes up over the long term, so I stuck with it. I kept investing. By 2011 I had my money back.
And a few years later, I had twice as much as I did back before the market collapsed.
The point is you have to stick with investing for the long term. If you can do this, you will see results.
#7. Find A Side Hustle
I can’t express how important it is to have a side gig that brings in some extra income. And I’m not talking about working a part-time retail job.
When I say to find a side hustle, I am talking about finding a way to earn money doing something you enjoy. This could be washing cars, mowing lawns, re-selling vinyl records online, etc.
The options are endless as long as you can earn an income from it.
Here is why this is so important. You live off your main income and save and invest as much money as you can.
Then when you have some side income, you can save and invest 100% of this money. You never budget for it. You never use it for groceries or your mortgage payment. You save all of it.
And it adds up fast and makes a difference. For most of you, you can easily make a couple hundred dollars a year using various apps on your phone.
For others who want more, you can do other things like dropshipping or starting your own website.
Here is how having a side hustle has impacted me. For years I was just re-selling on eBay and Craigslist and making around $1,000 a year.
Then I started my website and in a few years I was earning $10,000 a year. This is in addition to the money from re-selling various items.
Think about how big of an impact investing an extra $11,000 every year has on your bottom line. In 20 years this comes to over $500,000!
Even if you are only making $1,000 a year, in 20 years you have an extra $50,000!
Making this kind of money is more than possible. You just have to find the option that fits your schedule and meets your needs.
Related read: 10 work from home jobs that pay up to $100k/year
#8. Work On Your Career
Your career is your greatest income generator. Nothing else you do will earn you more money than your career.
As a result you have to make sure you put in the effort to stand out so you can earn higher than average raises.
This means getting more education, taking on new projects, finding ways to help your company save money, and even taking tasks off your boss’s plate.
When you step out of your role and exceed expectations, you earn more money.
But it won’t just happen. You need to schedule meetings and keep your boss up to date on your accomplishments and let it be known you want more money.
#9. Make Adjustments
After you implement these steps, your work is mostly over. I say mostly because every year you will have to review where you stand and make adjustments.
For example, any of the following could happen:
- Your goals change
- You pay off your debt
- You begin earning more side income
- You get a large raise
- Your investment portfolio needs adjusting
By staying on top of things, you ensure that you are putting as much of your money to work as possible. When you do this, you will grow your wealth at a rapid pace.
This is what happened to me. As I mentioned, when the market dropped in 2008, I kept investing and never looked back.
Now I am closing in on 7-figures. Had I sold out of the market and kept all my money in a savings account, I’d barely have more than what I had before the stock market crash.
#10. Live Your Life
Finally, as great as all this information is, you have to remember the most important part. You have to live your life.
Don’t work a side hustle that will make you miserable. Don’t create unattainable goals that will drive you crazy trying to attain.
For me, I could easily be working more hours every day to earn additional income. But my life is great right now. I am earning enough money that covers the bills and allows us to save a healthy amount.
At the same time, I get to spend ample time with my young daughters. I see them 2 hours in the morning and 2 hours more after work, and I can put them to bed at night.
If I was solely driven my money, I’d work more and see them less. But I only get one shot at life and I want to experience the most important parts.
No matter how disastrous your finances are right now, you can change things. And things can end up better than you ever imagined. You just have to be willing to put in the work and most importantly take that first step.
Without that first step, nothing is going to change. Chances are your life today will be your life in 20 years. But if you take action now, you can change it for the better.
And at the end of the day, you have to ask yourself, what do you have to lose by trying?
Author Bio: Jon helps readers understand and take control of their money on his website Compounding Pennies. By taking the time to be better with your money, you can achieve all your financial goals.
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