Think outside the budget: 5 ways to fix your finances

Debt is kind of a dirty word.

No one likes to think about it, but practically everyone has to deal with it at some point in their lives. Whether it’s related to credit cards, student loans, medical bills, car loans, mortgages and numerous other things, most of us will have to face the music eventually.

So, what do we do? Slowly chip away at the debt with minimum monthly payments and other short-term solutions or dig in and find the path to a better future?

1. Start with a plan

Debt is so interwoven into our daily lives that it’s easy to forget it’s there, even as a stay-at-home mom with a sizable student loans hanging over my head. My husband has his own student loan debt, too, and we share a car loan and a mortgage.

We consider ourselves financially responsible: We budget and put money into savings every month, as much as possible. Our long-term goal is to eventually set up a small homestead farm. We care about living simply and enjoying what nature has to offer.

But debt doesn’t play a leading role in that dream.

So, to make sure our financial goals become a reality, we constantly remind ourselves of this one fact: We have debt and are working every day to budget responsibly and pay it off.

This simple acknowledgment is what grounds our family financially and sets us up to budget wisely. Sometimes, that means finding ways to cut costs. Other times, it's about finding new ways to bring in money.

Because the loans have got to go, and we’re ready for our life after debt.

2. Categorize your income

I take a less-than-standard approach on income, and I think many people would benefit from this type of thinking. Any money that we bring in goes toward one of the following:

• Life-sustaining expenses

• Debt-building expenses

• Debt-freeing expenses

Life-sustaining expenses: Any money that goes toward food, shelter, necessary utilities, clothing or health care falls into this category. We budget for all of these things in our household. The budgeting isn’t always perfect, but life is a balancing act.

Debt-building expenses: Any money that’s spent on entertainment, fun or anything in excess goes into this category because it’s furthering our debt’s grasp on us. That might seem harsh — of course, we spend money on fun things for the family — but every dollar we spend is considered with weight.

Debt-freeing expenses: Any money that’s going toward monthly payments for the loans we currently have is part of this category.  At the end of the monthly budget cycle, any extra income goes into a savings account for future use to pay off our debts. For us, extra income could be anything from yard sale earnings to selling essential oils through a supplier.

3. Turn free time into paid time

My husband and I have dabbled in a variety of extra income sources over the past couple of years. Remember: Extra income should first go toward debt payments or emergency savings.

Freelance work: Figure out what you’re good at and leverage it to pay off your debt. I’ve always had a knack for writing and editing, so I choose to spend my free time doing exactly that, as well as graphic design work. This might look different for you, depending on what your personal strengths are.

Streaming: My husband enjoys playing video games in his spare time, so we decided to explore streaming. Essentially, streamers play games, talk to an audience or perform art in real-time. If you’re going to be sitting down anyway, you might as well stream it and see where it leads.

4. Make your money work for you

We owned an apartment building for a short period of time. My husband and I ultimately decided it wasn’t a perfect fit for our lifestyle, but the potential for income with apartment or home rentals is extremely high.

When it comes to paying down debt, don’t be afraid to get out of your comfort zone. If it works, you’ll speed up your goal of becoming debt-free. If it doesn’t, move on and try something new.

The downside to this approach, especially if you’re already in debt, is that you likely need to take out a loan in order to make this work for you. Nonetheless, if you make smart purchases for long-term gain, income properties can be a fruitful investment.

5. Evaluate your outlook on debt

If you’re determined to pay off your debt as fast as possible, first evaluate your outlook on debt. Too often in our society, we simply accept debt as a necessary part of life.

The better approach is to constantly strive to eliminate your debt and make continually improving financial decisions.

Second, take a look at what you’re good at. Brainstorm and find ways to leverage your strengths. As my husband says, “If you’re good at something, don’t do it for free!”

When it comes to paying down debt, don’t be afraid to get out of your comfort zone. If it works, you’ll speed up your goal of becoming debt-free. If it doesn’t, move on and try something new.

The journey to overcoming debt is like a race. You get to set the pace, and the goal is worth the hard work it takes to get there.