Wanna get out of debt? You then need to put in place a debt elimination plan. A debt elimination plan can be easily set up but is difficult to follow. But in the end, getting rid of your debt once and for all, is worth it.
Being debt-free will enable you to build wealth, take control of your finances, and help you achieve your long-term financial goals, rather than just worrying about daily expenses or bill payment. You might not even realize how badly your debt hurts you until you pay it off. So stop apologizing and take these six steps to get out of debt.
01 Make A List
You have to list all of your debts first. This list should include all of your debts, whether it’s student loan debt, credit card debt, or family or friends owing money. You should include the amount owed, as well as the related interest rate.
Then order list from highest to lowest interest rate. This is the order you’ll be using to pay off your debts. You may want your debt payment order changed depending on the type of compensation you want to use. The snowball strategy, for example, means you pay off the biggest debt first, and move on to the smallest debt next, and so on. You should also add up all of your debts to total. This figure can be surprising, but also inspiring to help focus on reducing debt.
02 Start Budgeting Effectively
The next step towards debt elimination is to set and stick to a household budget. You will consider cutting extra spending from your budget in order to get out of the debt fast. Think of luxuries like getting your laundry cleaned, buying a new kitchen gadget or going out to dine.
Check at other ways you can slash your monthly expenses, such as lowering your cable bill, cutting cable entirely or spending less each week on groceries. Have a target of freeing up $200 to $300 extra each month to put on your debt.
03 Set Up An Emergency Fund
The third step to eliminating your debt is to establish an emergency fund. While the estimated sum varies, you will try to set aside the living expenses for at least 3 months.
Put that money into an easily accessible savings account when an unplanned emergency expense arises. So you’re not going to have to resort to using credit cards and accumulate more debt. You may be financed using the money you freed up in your budget for this account.
Keep in mind that an emergency, like a broken arm or a car repair, is something that must be taken care of immediately. Not replacing your sofa or finding a perfect set of shoes on sale is an emergency. Make sure you only use this money for a real emergency, not to cover yourself when you are over-spending.
04 Start Paying Down Your Debt
Now it’s time to begin repaying your debt. Once you have removed funds from your budget and boosted your emergency fund, it’s time to apply the money to your list’s first debt.
Don’t split the money for your debts. You are gaining more traction by concentrating on just one debt and will pay off that debt more quickly. After completing paying off the first loan, pass on to the second. You’re supposed to apply the balance of your first loan, plus the extra money from your budget to debt two, giving yourself an even bigger amount to bring towards the second.
Follow this trend, move the old payments into the next debt on your list, and you’re going to eliminate your debt much faster. In having extra money to add to your debts you can speed up the plan even more. Always, make sure you understand the rules of your bank on additional payments to make your extra payments work for you most efficiently.
05 Stay Focused
Occasionally, you may need to find some inspiration or reinforcement to stay focused on getting out of debt. Gathering extra time at work, getting a second job or selling some products will help you get rid of your debt much faster.
Creating mini-goals and encouraging you to have small celebrations (such as dinner out) while completing a goal (such as paying off $5,000 in debt) can also help you stay focused.
06 Focus On Being Debt-Free In The Future
You should make a commitment to stay debt-free once you have worked so hard to get out of debt. That means planning and saving on your expenses. These are called sinking funds and for everything from home repairs to holidays, you can have them. It also means saving up to buy your next vehicle and keeping up with your spending, but now you’ll have more wiggle room in your pocket.
You should also focus on saving money and building equity, because this will help you handle the greater expenditures without going back to debt for them. A solid financial strategy helps you achieve your goals. Take the time to set up one, and talk to a financial planner to keep you on the right financial track.