Last week I talked about how to start “Saving Your Way out of Debt”. Now, let’s continue looking at how you can break the debt cycle forever!
Step 6: Build Your Safety-net
Whether you are self-employed or work for someone else, it’s really important to have a plan for the possibility of an interruption of income. A Safety-net Savings account is designed to cover your living expenses if your income is interrupted for any reason. Your Safety-net account is to be used only if you have an interruption in income.
Start slowly in building this account. Of course, once you’re no longer paying down debt, the amount you were paying toward your credit card bills can roll right into savings without changing your monthly spending plan one bit. At that point, you can build your safety-net much more quickly.
Acrobats on the high trapeze always have a safety-net below. This offers the acrobats not only protection, but the confidence to really fly. Safety-net Savings protects us, but it also offers us the freedom to create new career possibilities and rather than feeling trapped in jobs that make us unhappy. That’s why I think of this account as a “freedom fund.” So step 6 is to start saving money into your Safety-Net. Remember, start slowly.
Step 7: Celebrate being Debt Free!
Living debt free may seem like a fantasy, but I have celebrated this reality hundreds of times with people who have used the Saving Your Way Out of Debt plan. Clients have literally danced in my office after they made their last debt payment. I’ve danced with them too! Be sure to celebrate your accomplishment and acknowledge yourself for taking the necessary steps to unburden yourself from debt. You deserve it. Celebrate!
Step 8: Plan for the Future with Long-term and Investment Savings
Periodic Savings and Safety-net Savings not only keep us out of debt, but protects our investment and retirement accounts, too. Unexpected expenses or income interruption can cause us to dip into retirement funds or investment accounts which is enormously costly in terms of penalties, taxes, and interest. Worse yet, people often feel so much regret about doing so that their self-esteem takes a hit along with their assets. With Periodic and Safety-net Savings in place, your long-term savings is truly secure, and you can free up more dollars to invest for future dreams.
Step 9: Resist the Seduction of a Zero Balance
Once you’ve eliminated debt, those big zeros on your balance sheet can call to you, tempting you with promises of immediate gratification. Instead of succumbing, use your Periodic Savings as a way to make important, nonmonthly purchases. Learn to delay purchases until your savings grow enough to make them. The satisfaction of enjoying a special purchase that is made without incurring debt doubles the pleasure. The bottom line is to not start using your credit cards again once you’ve paid them off.
Step 10: Enjoy Real Financial Freedom
By leveraging the power of savings, you can free yourself from debt once and for all. Debt-free and secure, you can experience financial serenity. You’ll know that both your present and your future are protected. I’m a freer person today than I was when debt had its stronghold on me. Thousands of people who have put Financial Recovery into practice share the freedom of this life without the cage of debt and the stone walls of worry.
Financial freedom is not only about the amount of money you have. It is about having a healthy, secure relationship with your money at whatever your income level. Saving Your Way Out of Debt is can be a powerful tool in your personal Financial Recovery.