In today’s digital age, where with the help of money people can have all the facilities ranging from basic to luxurious. At times, some of these facilities don’t fit into a man’s budget, so the most common thing he ends up doing is getting a loan from the bank either through credit card or through other instruments available. And the amount which he owes to the bank is the debt which he has to pay overtime. And after getting under debt the most common question he asks is: How can I be debt free as quickly as possible?
One can be debt free, if he plans his payments properly and knows where he has to stop. And if at times he gets over the line, he must know how to be debt free in a most efficient way. To be debt free, a methodical pragmatic approach is the smartest and the best and efficient way. If you’re serious about getting out as soon as possible and that too inexpensively follow the below mentioned steps:
- Everyone’s committed to paying down the debt, but the best laid plans often don’t give the required results. One thing which helps a lot to avoid amassing of the debt is personal responsibility. When you know your personal responsibility and are committed to spending less than what you earn, you are less likely to fall in debt.
- Until and unless you know where you stand, it’s tough to end up with an effective plan. And pay off your debt, you must know where do you stand financially after all the basic expenses. One must run his household as a business and tracking where every last penny is going.
- Once you start tracking, you know what your needs are and what you want. As we all know human wants are unlimited, but to Identify and eliminate all the unnecessary wants will do away with the unnecessary expenses. One must put his needs before he wants. It’ll help him to save something extra every month which he can then allocate it to paying off small debts.
- The best way to identify and track your expenses is to create a budget. At the start of the month, one must plan his expenses accordingly. A budget is not just a plan to track your expenses, but it’s a valuable tool which helps you control spending, and to save something every month.
- Sometimes you always have an urge to make retirement contributions, but you ignore it, saying let’s enjoy the present and forget about the future. Yes, one must enjoy the present, but without affecting his future. When you create your budget, don’t try to boost cash flow by stopping automated paycheck deductions for your retirement savings plan. Eventually the tax breaks and future gains you’ll receive by building your retirement savings will be more than what you pay for an extra credit card interest.
- The best way to plan your debt payment is to first pay down the debt which has the highest interest rate. Generally it sounds more appealing to pay down a debt which has a 0% interest as this only ask us to pay the principal amount. But a person forgets that a debt with 0% interest won’t incur any additional interest if he delays the payment when compared to the one with the highest interest. One must pay the highest interest rate debt first — regardless of how much you owe — but simultaneously making minimum payments on all the other debts.
- Making multiple payments or paying something extra than the minimum will help you reduce your interest charges. Such payments would greatly reduce the interest paid on a long term debt.
- Use your emergency fund, as paying down high interest debt with a low interest savings makes a good sense. One gets emotional when doing this but keep in mind that you’ll still have access to those funds. As when you are clearing your high interest debt, by the end of every month you’ll have something extra to add up to your savings.
- Apply all your extra income towards paying your high interest debt, until you’ve completely paid it off. Such income must be diverted to pay down your highest-interest debt balance.
- Once you know where you stand and if you have time in hand, find a way for some extra income if you have time. And money earned from there can be used to nullify you debt.
Staying away from any kind of debt requires discipline and planning and so does clearing the same. Once you know you personal responsibility and commit yourself to get back on track with your financials, you’ll soon discover it’s not that hard to do so regardless of how much money you owe.