Debt: A Real Buzzkill
In the process of getting ready to enter your full-time lifestyle, you already know there are steps that need to be done. You will need to purchase an RV, purchase a tow vehicle (if you purchase a travel trailer or fifth wheel), downsize your belongings, sell your home (if you choose that route), secure a viable income, and reduce/eliminate debt.
Today I am going to touch a little on debt. When you are trying to decide if you want to try full-time RV’ing, one of the first things you should start to look at is your debt. I feel this is one, if not the most important thing that if you should look at and deal with in your planning process. Debt produces stress. After all, isn’t one of the reasons you want to try full-timing to reduce stress? If you hit the road and have to worry about how you are going to make payments each month that will increases not decrease your stress level.
No Debt + Nice Income = Skip This Post
If you have no debt and a nice retirement or business income, you might want to skip this blog post and re-join us next week. If not, here we go.
Now I am no financial advisor and I don’t have any magical formulas or strategy’s so I will just offer some common sense ideas and share what we did to reduce our debt. Keep in mind, what works for one person might not work for everyone. In my opinion, the best way to deal with debt is in steps.
Be Honest With Yourself
The first step is to make a list of all your debt. Be honest with yourself. Include ALL of your debt including your normal monthly bills. If you are good with a computer, you could make a spreadsheet, if not, a handwritten list is just as good. This will give you a starting point, a snapshot if you will, of everything you owe. You’ve done it! Now that you have entered all your debt, write down your income. Step 1 is complete. On to step 2.
The Second Step
The second step is to create a budget to follow moving forward. Be realistic. Don’t budget $50 a month for gas if you know it takes you $100 a month just to go back and forth to work. Don’t forget to include everything you would normally do within that month. If you get pizza every Friday, write it in (for now…lol.) If you go to the movies every Saturday night include that also (again, for now.) Don’t forget to include a small amount to put in savings. When you are done it should represent your whole month of bills, projected activities, and your projected income. Hopefully, your income is a little higher than your monthly bills. If not or if you are just breaking even, don’t panic. Let’s take another look at that budget. It is time to look at each and every entry and see where you can cut. It might not be a lot and it might hurt (lol) but there is always somewhere you can cut. By the way, for now, enter the minimum payments for your credit cards.
So, What Did You Come Up With?
Ok, what did you come up with? I know you’re going to say pizza and movie night are gone, that’s obvious right?…lol. How about your cell phone? Do you really need the top plan? You can probably shave off a few bucks if you lower your plan a notch or two. Yes, no more using a million gigs of data to stream music…lol. How about car insurance? Did you know if you raise your deductible you will get a cheaper rate? Let me say this about raising your deductible. I am merely letting you know that if you raise your deductible your rates will go down. You will have to pay more out of pocket if something ultimately did happen. So whether or not you should raise your deductible should be researched and weighed out completely by you. I am only saying that I know based on my own personal experience it will lower your rate. How about carpooling? Do you work near someone else with the same hours? Carpooling will save you gas. Are you close enough to your job to take a bicycle? More savings. Take a look at your home media. Do you really need every premium channel? If you switch to a basic service you will save a ton. Also, time to learn to cook. Preparing your own meals and eating at home will also save money. Anyway, I think you get the idea.
Where Are You Now?
So where are you now? Do you have extra? Are you still short? Depending on how serious you are about going full-time debt free, you might consider alternate ways to bring in more money. Yes, it means less free time for now, but remember you are trying to hit the road to be stress-free. Do you have any overtime at your job you can volunteer for? Any extra projects? Do you know anyone who needs some odd jobs done? How about unplanned income? Tax refunds, birthday gifts, or inheritances should all be applied to debt not wasted. The winter before we went full time, I was lucky enough to be able to get a bunch of overtime since the dept I worked for was short-handed. Plus, I lived in New York and we got pounded with a very snowy winter. So when I wasn’t working overtime on paperwork, I was able to gobble up a ton of overtime for each snow storm. If these things are not available to you and you need some ideas, I have put together a page on making income from the road. A lot of these ideas can not only be done while on the road, but they can also be done before you hit the road too. Check out that page for some ideas. Check out my page on making Money.
On To The Last Step
On to your last step. step 3. So now you know what exactly your debt and income is. Your working extra hours or maybe a part-time job or business you created (keep in mind that most of the time your own business will take some time before you see any money.) Now it’s time to start paying down that debt. At this point, you should be completely focused and armed with your battle plan.
Now comes the part where all the financial gurus out there disagree on. Some will say to start with the highest interest rates, some say to start with the highest monthly payment, and some say to start with the lowest balances. Again, I am not a financial advisor and can only tell you what we did. We chose to go with focusing on the debt with the lowest balance first. We paid minimum payments on everything except the one we chose and applied all extra money to that one until it was paid in full. I must say, you get a nice uplifted feeling when you send the last payment to one of your creditors and can cross it off the list. It now becomes a snowball effect because once you pay off one debt, you will now be able to take the money you had budgeted to the first bill and add that payment to your next target. Just repeat this step over and over until all your debt is gone.
If you are really determined and focused on paying down your debt, you will. It is not easy and will require some sacrifices. Entering the full-time RV lifestyle debt free will make it a lot easier to adjust to. You need to remember that living in your Rv full time is not all rainbows and sun. You will have problems just as if you lived in bricks and sticks. If you had problems while living in your bricks and sticks they will not go away just because you moved into your RV. They will come with you. The idea is to take the least amount of problems with you on the road. That means eliminating debt.
How did some of you guys get out of debt? Leave me a comment below. You never know. It might help someone else.