No matter how much debt you owe or are working to reduce it, reaching debt freedom is possible. Select will guide you through each step to calculate your total debt, select an effective debt repayment method and build a budget to help achieve your goals.
Establishing a budget is essential to meeting financial goals, including debt repayment. One of the following methods will assist in helping you determine when you will become debt free.
1. Set a Budget
Budgeting effectively and living within your means are both essential parts of debt repayment. Leveraging an expense tracking system such as that provided by Modern Frugality or an all-in-one app like Mint can help identify areas for cost cuts without significantly impacting quality of life.
Once you have prioritized your spending, begin repaying debt using the snowball method – starting with the one with the smallest balance and moving on until all debts have been cleared away.
2. Cut Back
Making a budget is the first step toward debt freedom. Doing this will allow you to understand exactly how much of your income is being siphoned off by spending and when you can expect to become debt free.
Debt-free individuals often show less desire to accumulate “stuff.” Instead, they learn to be content with what they already own and are open to making lifestyle changes such as cutting back on dining out or cancelling a premium cable package.
As part of their debt-free journey, people often work additional jobs or sell items for extra income to reach their financial goals. Though this can be hard work, this effort must be put in to reach your desired outcomes.
3. Save Money with Coupons
Saving money can help you pay down debt faster and become debt free faster. Consider using a budget tracking app to understand where all your funds go each month, identify expenses you could cut, and put extra towards debt reduction.
Some individuals use the debt snowball method, in which smaller debts are prioritized over higher interest debts. Both approaches may help save you money on interest payments; which one best fits with your personality and goals will ultimately determine its success.
4. Go for a Run
An enormous debt can create immense stress both financially and otherwise, impacting not just one area of life but all aspects. Sleepless nights or feeling physically sick could arise from anxiety over paying your bills on time; debt freedom will eliminate this worry, helping you live life more freely.
Outwitting debt can be challenging and requires hard work. This involves altering spending habits, tracking expenses, prioritizing debts and creating emergency and retirement funds – but ultimately it pays off in terms of financial freedom!
5. Put a Spending Freeze on Entertainment
Spending freezes are short-term challenges to help you assess and enhance your financial habits. They allow you to reduce spending on nonessential items such as subscription services or takeout, limit takeout, renegotiate cellphone or cable bills or renegotiate cellphone/cable contracts – or anything else not essential! NerdWallet recommends keeping essential expenses to 50% of income; leaving 30% for nonessential expenses such as subscription services/takeout etc, leaving 20% for savings/debt payments etc.
Try the debt snowball method to tackle your smaller balances first, giving yourself a psychological boost as each is paid off. Use any savings generated during a spending freeze towards an emergency fund or lump-sum debt payments.
6. Start Financial Peace University
Financial Peace University (FPU) can help anyone serious about becoming debt-free take the first steps toward doing so. This nine-lesson course covers common sense money principles without all the unnecessary jargon associated with traditional finance courses.
Step one should be to identify all of your debts (excluding mortgage). Although it can be daunting, taking this first step is essential in creating a plan for recovery.
As soon as your payments start increasing, employ the debt snowball method for debt repayment. Essentially, this involves paying off one debt at a time with any extra funds going toward paying off more debts! Once all debts have been cleared off, simply continue this cycle until all are gone!
7. Close Your Credit Cards
If you don’t use one of your credit cards anymore, closing it could help to reduce overspending. But be careful in selecting and timing when closing accounts: for instance, canceling newer ones could temporarily lower your score.
Before closing an account, redeem any rewards points or cash back that have accumulated before doing so. Doing this also prevents it from aging over time which could negatively impact your credit scores; so only close cards that you no longer use frequently.