4 Simple Steps to Debt Freedom |
By Lacy Gallagher on October 27, 2011
.jpg.aspx?width=75&height=75) Debt happens, but living constantly in debt is not a lifestyle for someone who wants to take control of his or her finances. There are simple changes that can be made to everyday life that will eventually leave a debtor debt-free.
1. Stop adding more debt. This step is very important because if you really want to be debt-free you have to create a personal debt ceiling and start paying that off. Do not charge more than you can pay off on your credit card each month; better yet retire your credit card for awhile a use your debt card which takes the money directly from your checking account preventing you from spending more than you have available. Avoid any purchases that you literally cannot live without until you have successfully completed your goal of eliminating debt.
2. Know yourself. Just like stopping any bad habit you will be tempted, but understanding your personality will help you best avoid these debt-causing temptations. You either the type of person that succeeds by cutting bad-baits cold turkey, then you like drastic steps and speedy results. You are the type of person that works better by weaning off a bad habit, then you prefer little gradual changes and are patient. The strategy you plan should incorporate the way you are wired to deal with change.
3. Organize your debt. Collect all your debts and list what you owe each creditor at what interest rates. If you are the type of person who prefers drastic changes, it is recommended to start tackling the bills with the highest interest rates. This option is the most beneficial financially. If you are overwhelmed by change, you might find the task easier to conquer if you begin by quickly paying off the smallest debt, and continuing upwards in monetary value of the bills.
4. Plan your attack. No matter if you chose to start at the highest interest rate or the lowest cash amount, becoming debt-free requires lifestyle changes. Changes simple things like preparing meals at home rather than always going out or switching to some generic brands will end up saving a large amount of money over time. Write out a monthly budget—shelter, food, utilities, gas, a small amount of emergency money for unforeseen expenses and anything else that you spend money on each month. The amount remaining after the budget is set will be used to wipe out your debt by:
- Paying AT LEAST the minimum amount on all lines of credit.
- Paying as much MORE as possible than the minimum amount on the debt positioned at the top of your elimination list.
Reference: http://gradmoneymatters.com/debt/7-steps-that-made-me-debt-free.html |
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