You know what helped me get out of debt? A freedom date. What is a freedom date? I can guarantee that question probably does not come up in regular conversation. When is the last time you asked your friend over coffee, “Hey, when is your debt freedom date, again?” Maybe it’s a question we need to ask more often.
A debt freedom date is exactly what it sounds like: the date when you’re free from debt! So again, when is your debt freedom date? If you don’t know, in today’s article, I’ll help you find out. By the way, ours is November 23 of this year!
To find your debt freedom date, you will need
- to know how much debt you have,
- to have a written budget, and
- an accountability partner to hold you to the budget you created.
Once you have those three pieces in place, it’s time to calculate your freedom date. It starts with a snowball. Not the kind that just popped into your head … a debt snowball. Using the debt snowball method, you start paying off your smallest debt. Once that’s paid off, apply what you paid on the smallest debt towards the next smallest debt and begin to pay off that debt. See? It snowballs! From there you can project when your final debt payment will be made—that is your debt freedom date!
Let’s look at an example.
Say you make $2,300 a month and your monthly expenses are $1,800 (your monthly expenses include the minimum payments to all debts). That leaves $500 left over each month to apply as extra debt payments. Now, say you have two debts. The first debt is $1200 (including interest), with a minimum payment of $100. The second debt is $2000 (including interest), with a minimum payment of $200. You will start by paying off the first debt, making a total payment of $600 each month ($100 minimum payment + $500 extra debt payment). After two months, that debt will be paid off, and you can now focus on the second debt, which sits at $1600 after two months of minimum payments. Each month, you will make a total payment of $800 to the second debt ($200 minimum payment + $600 that you were applying to the first debt). This debt will be paid off after another two months. That means your debt freedom date would be four months from today.
Just as a snowball gains momentum going downhill, you will “snowball” your debt. It may feel uphill right now, but soon you’ll feel the momentum and freedom of paying off your debt. You can always add momentum to paying off your debt sooner by finding ways to create more margin between your take-home pay and your monthly expenses.
My hope and prayer is that you don’t feel burdened by debt and that you know there is hope and peace through Jesus. After all, He paid the greatest debt of all on the cross. I believe that God gives us certain abilities, gifts, and talents that we can use for His glory. Part of following the vision God gives us requires us to properly manage what He provides, and that includes our finances. One of the biggest things that can hold us back from accomplishing the things He sets out for us is debt. Take a step toward freedom from debt today!