…Getting out of debt is very crucial to financial freedom
In life everyone strives to attain financial freedom. No one wants the situation whereby they cannot afford to take care of their needs. However, there some bad financial habits some people perpetuate that is highly detrimental to their finances and these habits can prevent them from attaining financial freedom. One of these bad habits are Debt. Debt is like a noose around your neck. It irritates, suffocates and stifles the life out of you.
Debt build-up can arise due to poor financial decisions or due to an unplanned event. Whatever situation that put you in debt, it is important to strategize to get out of it. Living in indebtedness for so long is not good for your finances, the reason being that the more you leave your debt unpaid the more the interest it accumulates.
Living a debt-free existence is feasible, as long as you are willing to review your financial habits and to make some lifestyle changes.
Here is a 7-step guide that can help you get out of debt
1. CUT DOWN ON EXPENSES
Some people what to impress others by acquiring irrelevant material things that put them perpetually in debt.
They buy new things, upgrade their gadget and expand their wardrobes. All these things listed above are liabilities and not assets. Working on a list of the absolute essentials will help you minimize expenditure, which will ultimately prevent you from accumulating more debt. Cutting down expenditure is just as important. This is a very important step that you need to undertake in order to break out from the vicious cycle.
2. STRUCTURE A REPAYMENT PLAN
Now that you have stopped accumulating new debt, you are ready to come up with a repayment plan.
Structuring your instalments and figuring out how much money you will need to repay your debts is going to make it easier for you to get organized and to figure out the best financial strategy.
Additionally, having a goal is also going to make it easier for you to save money.
3. START SAVING
Saving money is a necessary move towards clearing your debt. You have to save money if you must clear your debt.
Come up with a monthly savings goal. In the beginning, it should be a small portion of your income. When you get used to that, you can increase the percentage.
You can consider getting another stream of income that will assist you in the savings attempt. All of the money that you get from your second job should be placed immediately in a savings account.
To save some money, you will have to get ready for a mentality change. Stop thinking as a consumer. Many people are compulsive shoppers. Think twice before buying something. Do you really need it? Can you go another month or two without buying such products?
Once you get into the habit of questioning your purchase desires, you will find it much easier to turn down temptations.
4. FIND A DISCOUNTED LOAN TO REFINANCE
Refinancing current debt is usually a good idea. Some loans come with attractive interest rates that will make it much more logical for you to get that money and to terminate all of the debt you are currently dealing with.
Be very careful when going through loans and refinancing options. Compare the opportunities side by side to figure out which ones offer the best conditions.
Consulting a professional in the niche will be useful because you may have difficulties understanding all of the terms.
Read also: #SmartKobo: 7 money habits that can save your marriage
5. FOLLOW THE BUDGETING RULES
Budgeting will help you keep track of expenditure, make debt instalments on time and save some money. The 50-20-30 (or 50-30-20) budget rule is an intuitive and simple plan to help people reach their financial goals.
The rule states that you should spend up to 50 per cent of your after-tax income on needs and obligations that you must-have or must-do. The remaining half should be split up to 20 per cent savings and debt repayment and 30 per cent to everything else that you might want. That will wipe out debt faster and help you save on interest.
6. GET HELP FROM FAMILY
You will face tremendous challenges when trying to handle debt on your own. In order to be successful, you will have to get your family involved.
Make sure that all your family members understand the current situation. Describing your financial difficulties realistically will stimulate everyone to limit expenditure and to contribute in helping you to clear the debt.
If you are married, open up to your spouse. This will enable you both to strategize the best way to repay the loan.
7. LIQUIDATE SOME OF YOUR ASSETS
Another way you can clear your debt is by liquidating your assets. This is why going into investment is important. There some debt you will be in, that if not cleared on time, can accumulate within a year. And once it accumulates, it becomes a burden, thereby putting you in so much stress and panic.
The best way to go about it is by selling off your asset like land if you have one. Sell it off and use part of the money to clear your debt. And you can reinvest with what is left by purchasing another affordable plot of land.
References
- https://www.lifehack.org/373500/8-step-guide-getting-out-debt
- https://lifehacker.com/a-step-by-step-guide-to-getting-out-of-debt-1475515477#:~:text=A%20Step-by-Step%20Guide%20to%20Getting%20Out%20of%20Debt,How%20to%20Use%20Windfall%20Money%209%20Breakdance%20Party
- https://www.thebalance.com/steps-to-get-out-of-debt-4842113
- https://blog.taxact.com/steps-to-become-debt-free/
