Striving to live a debt-free life is definitely a worthy undertaking. Carrying debt from month to month is both expensive and worrisome. Moreover, the associated interest payments siphon cash away from what could be a much better quality of life — once you’ve mastered the fine art of living debt-free.
With that in mind, here are five ways to get out of debt.
1. Make and Stick to a Spending Plan
Keeping a tally on all of your monthly expenses and planning for mandatory outlays is an excellent way to get a handle on your finances. A household-spending plan makes it easier to cut costs, and determine exactly how much you’re spending.
Crafting a spending plan is also easy and sticking to is where you’ll see real results. Budgeting apps like Mint or TrueBill will help you keep track of your spending by providing automated balance notifications and alerts.
2. Eliminate Unnecessary Spending and Increase Your Income
When you’re truly serious about how to get out of debt with Freedom Debt Relief , or a similar company, eliminating unnecessary spending and increasing your income will set you up for a terrific financial win.
Today’s technology makes it easier than ever to work from home or to create an income producing side-hustle. This additional income can contribute directly to paying off debts.
Adding a few extra dollars to your household income can make a major difference too. Once you’ve paid down your debts using the extra income, you can use the additional money to build a nest egg, long-term savings and investments.
3. Pay Off Small Debts First
Create a list of all of your obligations listed from the lowest to the highest balance. After you have a complete tall, including past due accounts, credit accounts, collection accounts, personal loans, and similar expenses, tackle the smallest account first.
Experts recommend paying the minimum amount due on the larger account balances each month to leave yourself room to make the largest payment possible on the smallest one. While it may take a while to see results, your efforts will be rewarded with a significant reduction in debt over time. Once the smallest debt has been covered, move on to making heftier payments on each progressively larger account in the same fashion until all are paid in full.
4. Stop Creating Bad Debt
According to debt repayment experts, one of the best things you can do to get out of debt is stop making more of it.
Now, with that said, there is a difference between good debt and bad debt. Good debts are obligations you take on to support acquisitions with the potential to appreciate over time, or help you generate more income.
A mortgage, student loans, a practical car to use to get back and forth to your job, classes to improve your professional abilities all qualify as good debt. Bad debt is money you borrow to acquire things that will ultimately be worth less than you paid for them, such as clothes, movie tickets, restaurant meals and the like.
5. Pay Yourself First
Many banks, credit unions, and financial institutions have features in place that make it easier for you to save money without even missing it. Automatic savings apps and bank accounts help you save money when they automatically deduct a designated percentage of your direct deposits and divert them to your savings account.
You control the amount deducted from your account and how often the amount is deducted. For example, you may find it easier to deduct 10-15% of your paycheck instead of 20%. When you’re trying to figure out how to get out of debt, you need every advantage.
Implementing these five ways to get out of debt will set you on the road to a debt-free life. More than anything else, the peace of mind you’ll achieve makes the effort worthwhile.