I recently got a new job that will increase my income by $20,000 a year. I’ve got $65,000 in debt, and I’m trying to pay it off, so I know I need to adjust my budget. Do you have any suggestions for a situation like this?
Congratulations on your increased income! The first thing I’d tell you is not to get used to any permanent luxuries while you’re paying off debt. Go out and celebrate with a really nice dinner or something like that after you get your first paycheck. But don’t go nuts or pick up any big, new stuff. The more you put toward debt, the faster it goes away.
I’ve been doing this financial thing for a lot of years, and the one thing I’ve found that gets people out of debt is passion. I want you to be so passionate about getting out of debt that you don’t even consider doing anything else until it’s all gone. Your thought process needs to be, “Wow, I got a new job making more money. I can get out of debt even quicker!”
Again, I’m okay with you adjusting a bit that first month and having a little fun to celebrate your good fortune. But after that, I want you to turn around and attack the debt with even more intensity than before. Way to go, Mitchell!
* Dave Ramsey is America’s trusted voice on money and business. He has authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. His newest book, written with his daughter Rachel Cruze, is titled Smart Money Smart Kids. It will be released April 22nd. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.