Gaining freedom from debt may not be simple, but with hard work and the proper plan in place it’s entirely achievable.
Prioritise your bills and debts, then determine how much extra can be put towards paying down those debts each month using the debt snowball method.
1. Make a Budget
An important step toward debt-free living is creating a budget and tracking your spending. Doing this will allow you to identify areas of spending where cuts could be made without substantially diminishing quality of life.
Use an online budget calculator or spreadsheet to track your monthly expenses and expenses. Start by tracking how much money is being spent on things such as groceries, utilities, gas for your car and rent/mortgage payments before subtracting that total from your total income.
If you’re struggling to make ends meet, consider cutting expenses or seeking additional sources of income. Working an extra shift or picking up freelance work could make an immense difference when applied towards debt repayment.
2. Cut Your Spending
Without exception, getting out of debt requires cutting spending – and that can be challenging even on a limited income.
Saving more can seem easy when your focus is solely on making extra payments or contributing to savings accounts, but for any real progress to be made toward becoming debt free you must do both simultaneously. Starting a side gig or forgoing non-essentials such as concerts and meals may need to take priority in order to stay debt-free.
Start meal planning and stockpiling food so that you can skip a grocery trip each month, as well as cutting unnecessary subscriptions such as magazines, online services, or weight loss programs. Any savings of even just several hundred dollars each month will help speed your path out of debt – and will feel amazing once accomplished!
3. Pay Off Your Highest-Interest Debt First
When it comes to paying off debt, being creative will be key. Reduce or cancel unneeded expenses such as entertainment, cable TV subscriptions or gym membership fees. Also look into increasing income through house sitting services, Uber/Lyft driving jobs or freelance work opportunities.
Prioritize debt by interest rate as another effective strategy to pay down debt faster. Make a list of your outstanding loans, with current balance, minimum monthly payment and interest rate information; organize them from lowest interest rate to highest. Pay minimum payments across all debts while allocating any extra funds towards those that carry higher rates of interest.
As each debt is paid off, move onto the one with the highest-interest rate until your entire debt load has been cleared away. While it will take time, once debt-free life will finally come calling!
4. Make Extra Payments
There’s plenty of generic advice out there on how to become debt free, such as “Earn more money” and “Cancel your credit cards.” But these suggestions may only work if your lifestyle changes accordingly.
One effective way to increase your income is to find a side hustle, take on another job or ask for a raise. Make sure any extra funds go toward paying down debt rather than spending it further on yourself.
Engaging a professional debt relief company may also help improve your financial status by helping negotiate with creditors to lower interest rates and decrease overall debt amounts.
Breaking free of debt may not be easy, but it is achievable. Millions have done it and so can you if you commit to making smart financial decisions moving forward. Avoid bankruptcy at all costs and remember that even minor sacrifices now may save a great deal of grief down the line.