Simple Tips to Rid Debt and Claim Financial Wealth

17
July

When you think about your annual income, you may believe that it should be enough to live on comfortably and even provide enough money leftover to fund a savings account. However, in reality, if you are like so many other people, you struggle to make ends meet each month. You may run low on cash from time to time, and you may even turn to credit cards to make ends meet, to pay for life’s little emergencies and more. The fact is that by eliminating your monthly debt payments, you may actually be able to maintain a comfortable lifestyle and grow wealth over time. So how can you eliminate debt from your life?

Buy What You Need
Many people are in debt today because they have made purchases that they simply could not afford to make. Using a credit card equates to borrowing money for those purchases. If you have been relying on credit cards to make ends meet, this is a sure sign that you need to re-analyze those things that are necessities in your life versus those that are luxuries. When you buy only those things that you need, such as groceries and other necessities of life, you will free up a significant amount of cash in your budget. Each dollar that is not spent on luxuries or other unnecessary items is a dollar that can be used to pay down your debts. Each purchase should be considered a decision.

Establish a Savings Account
It is common to turn to credit cards to pay for life’s little emergencies when cash is not available. These emergencies may be unexpected medical bills, appliance repairs, auto repairs and more. While these are not regular expenses, the fact is that these are not entirely unexpected expenses either. People do get sick, and cars and appliances do need repairs from time to time. If you don’t have a plan for paying for those expenses as they arise, you will continue to rely on credit cards. You will never pay off your debts if you continue to make credit card purchases. When you establish and fund a savings account, however, you provide yourself with a financial plan for paying for those expenses that are not a part of your normal budget. It may seem counter-intuitive, but you should save up at least a few hundred or even a few thousand dollars into a savings account before you really start focusing on paying down your credit cards and other debts. This is a fund that can prevent you from depending on credit cards and using them for future purchases.

Focus On One Debt At a Time
It is common for an individual to have multiple credit card accounts, student loans, a car loan and more. Trying to decide which of your many debts to pay off first can be difficult, and you may consider dividing your extra money equally between all of them. However, it is best to focus on paying off one debt at a time. For all debts except the one that you want to pay off first, only make minimum payments. Pay every extra dollar you can toward the one debt you are focusing on until it is paid off. So which debt should you focus on first? There are different factors to consider. If your car loan or another debt with a fixed monthly payment is almost paid off and has a high monthly payment, you may consider paying this debt off first as it would free up a large amount of money that can be applied to other debts. Otherwise, you may consider starting with an account that has either the highest interest rate or the lowest balance.

Paying off debts is not something that is done overnight. It takes a lot of time and constant focus on your goals. Many people find it motivational to chart their progress on a monthly basis. You can start by listing all of your debts, including the monthly payments and outstanding balances. Then, create a second column that shows the current balance of the debts. Each month, you may notice that your outstanding balances are decreasing. This can help you to stay motivated to achieving your goals.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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