Many people dream of the day that they will have independence and absolute freedom from debt. The first step towards achieving this is to make a concrete decision to work towards the freedom no matter the difficulties. Upon reaching that conclusion, now you can be said to be ready to kick your debt snowball into action as well as figuring out how to get extra cash to your name. Debt is common to all but it is not something worth having to battle with every other day. Worry no more because if you stick with us we will show you how to pay off debt and stay out of debt for good in seven sure-fire ways.
Step 1: Find out how much debt you owe.
For one to develop a workable debt repayment strategy, knowledge on how much is required from you is essential. It is impossible to work out a plan to offset a debt that you know little or worse still nothing about. Write down the debts you have (car loans, credit card balance, student loans, etc.), interest rates and the minimum payment for each. The interest rate guides you in deciding on which debts to clear first as high interest debts may be a bigger burden than low interest debts.
Step 2: Choose your approach.
With the knowledge of the total debt that you owe, you can now plan on the most appropriate way to repay them. There are two main ways to go about it:
- a) Beginning progressively from the smallest to the largest debt ignoring the interest rates.
- b) Beginning with those that have high interest rates downwards to those with the least interest rates.
Whichever the method that you choose, it is advisable to service the other debts with the minimum amount required.
Step 3: Adjust your spending
Effective debt free plan involves making big changes that will impact positively on your finances. These range from getting rid of your credit cards to selling the unused stuff. Other changes may include being in possession of one car to reduce the expenditures and also this might save on unnecessary debts.
Step 4: Create a budget
A budget helps to know how much cash is available for spending. It also alerts on when the expenditure is not right. In making a budget, you should first figure out how much money you make, what are your major expenses, what is debt payment plan etc.
Step 5: Improve your spending habit.
In an effort to keep off from debts it’s of essence to improve on your expenditures. For example, you can avoid eating out as this is likely to add on your spending. Also, you should learn to say NO to things that are not in your monthly budget e.g. partying with friends as this is likely to tear your financial basket and cause unnecessary strains.
Step 6: Cutting down on interest rates.
This can be achieved by negotiating with the service providers e.g. those that provide student loans and credit cards and if you achieve this then you can used the extra cash for investments or even paying off debts.
Step 7: Invest
Financial freedom becomes realistic and fun when you have you have a backup plan for your cash requirements. Every extra cash that is not being channeled towards debt clearing can be used to create a financial pool that will ensure that a recurrence of debt does not occur. If properly planned, then you can smile and sit back and watch your cash grow and work for you.
Above all, stay focus on your goals, stick to your budget and look for alternative ways to add to your income basket to speed up your journey to freedom. Don’t forget to appreciate yourself for the small wins that you get along the way.