If you are getting anxious because of the recurrent bills you have to pay you might also be feeling that debt is holding you back from achieving your dreams. The only way to make sure you’ve blasted all the limits that debts impose on you is taking action towards freedom.
Make a commitment to climb out of debt
While this might look like an obvious thing, it’s the stepping stone to achievement. If you’ve been in debt, you know that it’s not easy to break free. Besides consistent discipline over the entire debt recovery journey, you’ll need to make significant lifestyle changes. This means that some of the things you’ve been doing with your friends will have to go to pave way for your financial freedom.
To start with, you should avoid making intimidating plans since they can be difficult to accomplish. However, it’s important that you make hard decisions like giving up the shopping sprees and spontaneous expensive treats. Without a hard stand, it’s almost impossible to achieve financial freedom. If your partner is also trapped in debt, you have to make the commitment together if you intend to achieve any meaningful success.
The journey to financial independence takes several months and sometimes it can last years. Take a moment to think about the benefits of a debt-free life like being able to take luxurious vacations with ease and buying your dream home. When the long-term goals are more important than regular night outs and keeping up with fashion trends, you are on the right path.
To stay motivated, find an appropriate visual reminder of what you want to have when you are finally free. It can be your dream house or a long-awaited vacation that you want to have. Before you spend any money, think about your goals and ask yourself if the spending will jeopardize their achievement.
Track your spending
For smooth debt repayment, it’s important that you know how much you are spending every month. Only then can you identify the areas where you need to make immediate adjustments. If you want an automated process, there are numerous online tools that use your financial accounts to determine your expenses.
Once you’ve determined your monthly expenses, take some time to check for any expenses that are working against your financial goals. If you realize the monthly expenses for lunch are getting higher, you can look at cheaper alternatives like packing your own lunch. Most people can manage to give up the monthly expenses at the fast-food stores by adopting a healthier lifestyle.
Work on your budget
First, you need to determine the total annual income after taxes and other deductions. The next step is adding up all your necessary expenses including housing, utilities, transport, and groceries. Take some time to figure out a balanced amount of money you will be spending on your groceries. The amount should comfortable to live with but shouldn’t facilitate unnecessary spending.
If the amount of money spent on necessities is half of what you earn, it can be hard to repay your debt comfortably. However, you can revisit your budget and see if there are areas that can be adjusted further. Services like cable TV and cell phone plans are common culprits for a bloated budget and they can be trimmed to affordable levels.
Integrate your debt into the budget
Determine your minimum loan payments and calculate the percentage of your net income. If your recurrent expenses are less than 50%, dedicate at least 20% of the income to debt settlement. In the event where the required minimum payments are lower than 20% of your income, it’s wise to pay more than the minimum payments.
To calculate how much money you have left for extra expenses, subtract the monthly expenses and debt repayment amount from your net income. The figure you get should be divided by four to come up with the amount of money you can afford to spend every week.
If the amount left is not sufficient to cover dining out expenses, travel, entertainment, and health, you might want to revisit your budget. You can lower the amount you have set aside for debt repayment but keep in mind that your chief aim is debt elimination.
Kick off the debt repayment plan
After you’ve set your debt repayment targets, it’s time to execute the plan. Allocate the minimum payments towards all the $5000 quick loans you have but concentrate on any debt with high interest rates. You want to clear this debt as fast as you can because it can accumulate pretty fast if neglected. After it’s cleared, move to the next loan with the highest interest and handle it in the same manner.
This strategy is quite effective in helping you pay less in interests. However, if you feel that the amounts are high and intimidating, it’s good to begin with lower amounts. This helps you build the necessary momentum to face the huge amounts.
You can also consolidate your debts so that you’ll be dealing with a single debt. If you suspect that you are likely to miss the payments, it would be wise to set an auto repayment plan.
Earn more money and use it to pay the debts
Earning more money tends to be a sure strategy when breaking free from debt. Basically, trimming your expenses can free up some significant amounts of money but an extra revenue stream can be the game changer.
The objective is building your capacity to clear all your debts more quickly. Therefore, look at all the available options from negotiating for a pay rise to getting an extra job.
When you are deep in debt, the idea of financial freedom seems vague and out of reach. But the reality is that you can climb out of debt if you commit to the goal. While it takes time and perseverance, there is joy and relief when you have finally cleared your debts.
To stay motivated, make sure to celebrate every milestone. The earlier you adapt to your new lifestyle the faster you will be able to work towards your goals. It can be difficult at first but with dedication, you will get used to the changes. Finally, when you clear all your debts it’s important to guard yourself against the habits that got you into debt.