How to Get Rich & Get Rid of Debt

Being rich is no guarantee of being debt free. That's because it is possible to overspend whether you earn $10,000 per year or $10 million. Wise money management habits are key to both getting rich and becoming debt free. The habits you need to eliminate debt, such as planning purchases and delaying gratification, help you accumulate wealth when the debt is gone. Despite these similarities, you must eliminate your debt before you can become rich.

Instructions

1

Put $1,000 into savings account as an emergency fund. Personal finance adviser Dave Ramsey suggests doing this before you focus your efforts on eliminating debt. Save this money for emergencies only.

2

Make a list of your debts, in order from the one of the smallest amount to the one of the largest. This is the first step in Ramsey's debt snowball plan, which gives you encouragement to eliminate debt. You will work on paying off your debts in this order.

3

Keep a written record of your purchases, including everything from bills to groceries and entertainment. Writing down every time you spend money causes you to consider which of your purchases are actually necessary. For instance, if you know you must make a record of buying a bag of potato chips from the vending machine at work, you're less likely to spend the money. Every penny counts, so don't exclude anything.

4

Total the expenses on your list at the end of the month. Review the list and circle or highlight anything you find unnecessary, even if it's a bill. You might find that your cable bill seems high, for example, considering you rarely watch TV. Devise ways to lower or eliminate these expenses.

5

Pay the minimum monthly balances on your debts, except for the one at the top of your list. Use whatever money you can spare to pay more than the minimum on that one. Concentrating your efforts on a single debt at a time produces results more quickly than paying more on multiple debts at once, which boosts your confidence.

6

Repeat steps 2 through 4. The money you save by reducing your expenses should help you pay more on the first debt until you eliminate it. Use the minimum monthly payment from the first debt, plus any money you can spare, to pay off the second debt on your list, and so on.

7

Compare interest rates on accounts among different banks. Use the money you save by eliminating debts to open an account and continue paying your former monthly payments into the account every month.

Add the interest on your savings accounts to your salary to determine how much money you earn per year.