Debt is a great worry for anyone and many people try to ignore it. Accepting that you have debt is a great start, but many people don’t know where to start when it comes to actually doing something about it. In this post, we’ll be looking at what steps you should take in order to become debt free.
Find out exactly how much you owe.
Find out how much you owe in total, whether it’s all in one place or spread out amongst several debtors. Working out how much you owe is the best way to see how much you can pay off and how quickly you can do it. You’ll also want to find out your total monthly minimum payments.
Find out how much the minimum payments are.
You need to at least pay the minimum payment or else you will receive a fine. If you have multiple debt, it is best to try and pay off one at a time but, you must make sure you pay the minimum debt of all your debtors in the mean time,
Work out your cash flow.
At this point you’ll want to know how much money you are receiving and how much you are spending. If you are spending more than you’re earning, you will need to work out ways to tighten the belt and make it so your income outweighs your outgoings. You may need to sacrifice some luxuries but it is worth it in order to become debt free.
Once you’ve got a positive cash flow, you’ll want to start planning your way of getting debt free. If you only have one debt, then you’ll obviously want to focus all your spare income on that. If you have multiple debts, you’ll want to work out which one requires the most attention and then focus on that.
There are two ways of working out which debt you should start with. You could decide to start focusing on your smallest debt first and work your way up to the largest. This means you’ll start off easier and work your way up. However, keep in mind interest. If your smallest debt isn’t the one with the highest interest, you may want to consider the second way. The second way has you tackle either the biggest debt or the debt with the most interest. This means you’ll start off hard but every debt you pay off will become easier and smaller. The second method tends to be the best if you’re prepared to get tough.
Set a goal.
A debt free plan can tell you how to get out of debt but a debt free goal can give you an idea of when you’ll be debt free. Setting achievable, realistic goals is a great way to see if your plans are working and gives you a great confidence boost.
Deciding to tackle your debt is great, but the real challenge comes in actually paying it off. The faster you pay it off, the faster you can have peace of mind and a fresh financial start. Work hard to earn more money and consider doing extra time or working weekends. Speed up this process by making as many cuts in your spending as possible. Go without luxuries, you can always continue buying them after you’re debt free.
Don’t give up!
It may get tough at times but never give up! People have become debt free before you and others will do it after you. It is possible. Accept that paying off debt can be a lengthy process and stick with it. Good luck!