Having debt sucks, doesn’t it? You never envisioned it this way: your car broke down; you owe rent, and that phone bill is pending. You’ve suddenly found yourself in a life of debt, working solely to settle these debts. It sucks, but you’re not alone. Many people in the world right now face the problem of debt. What’s so annoying about debt is the fact that the more you owe, the harder it is to escape.
So, how can you achieve a debt free life? To be honest, getting out of debt is no easy task. You must first understand that debt is a serious problem which requires full commitment to resolve it. If you’re motivated enough to begin erasing your debt, here’s how:
- Estimate your total debt:
Like any problem, debts don’t resolve themselves. You need to sit down, compile your bills and sum up the total amount of debt you’re in. It’s best to write them all down on a piece of paper or better yet, use a spreadsheet and sum them all up. Having such an overview of all your debts will help you plan how to pay them off. You visualise that that ‘zero’ amount of debt now. You feel good, don’t you?
- Categorise your debt: As you compile your list of debt, place them into categories; and sum up the amount of debt in each category. Debts differ in type. Some are credit card debts, mortgage, loans, etc. Don’t forget to list them in order of preference, i.e. time of payment and interest rate. You don’t want to be caught napping when a debt is due. Credit cards often have the highest line of credit and interest rates. Perhaps your credit cards should take foremost attention, when deciding to pay off debt, don’t you think?
- Settle one debt at a time: Trying to pay every one of your debt simultaneously never works, and only makes things worse. After drawing up your debt preference, make an attempt to pay off high interest debts, before they cost more. For credit card debts, pay off the high interest cards first every month. That feeling of achievement will spur you on to settle the rest of your debts. Debt is a snake that needs to be cut off from the head. So, before you can gut the rest of your debt, sever the highest ones.
- Juice up your credit score: People in debt often neglect the importance of credit score. You could avoid a lot of debt yearly in the form of interest if you take the time to improve your credit score. A better credit score entitles you to lower interest rates. Otherwise, you’ll only be eligible for high-interest rates, which is the reason a credit card debt may seem insurmountable. Boost that credit score mate!
- Spend within your financial strength: Apparently, except you love debt, you should only buy what you can afford. Ignore the bandwagon effect. If you don’t have the money to buy an item, then don’t. And don’t use that credit card either. A credit card should be viewed as a tool used to purchase things now that can be paid off at month end. A credit card is not an extra allowance, it is a loan. Get the picture or get the strap!
- Consult a Debt Advisor: If you’re neck deep in debt already, chances are you need debt counselling. A professional debt consultant or advisor can analyse your debt for you and proffer possible means by which you can be free of them. Debt advisors also offer tangible knowledge inputs when you take steps to settle your debt. Debt counselling always yield positive results; have at it.
Remember, achieving a debt free lifestyle is not a one-off attempt. It is a lifetime process which requires time, effort and commitment. The rewards are endless. Imagine waking up every morning, debt-free, with a feeling of purpose. The feeling is priceless!