Top 3 Ways to Become Debt Free
Are you tired of struggling with debt and never coming out ahead? Then we have just the guide for you. The following post lists 3 invaluable tips on how to become debt-free.
We start by teaching you how to create a budget and stick to it. This includes some applicable steps on how to cut unnecessary spending.
Secondly, you’ll learn the importance of building an emergency savings fund and how to do it. Lastly, we’ll give you specific, strategic instructions on how to attack your debts and pay them off once and for all.
Ready to learn all about it? Then, keep reading.
1. Stick to a Budget
You’ll never get rid of your debts if you create them faster than you pay them off. Unless you choose a budgeting system and stick to it, you’ll have to choose between IVA vs bankruptcy.
Choose Your Budgeting System
There are several budgeting systems to choose from. But the easiest is the 50/30/20 method. Simply put, this means that:
- 50% of your income goes to necessities (bills, food, gas)
- 30% goes to unnecessary wants (mochas, movies, fast food)
- 20% pays down your debts
You can also try the envelope method. This is where you cash every paycheck and split the money into categorized envelopes (food, electric bill, etc.).
Alternatively, you can use your debit card for certain bills instead of cash. But the important thing is that this prevents you from racking up any credit card debt. Whichever method you choose, though, just be sure that you stick to it.
Cut Unnecessary Spending
Your budgeting system will help you limit frivolous spending in general. But there are also some specific luxuries that you can cut out entirely. For instance, if you pay for cable television and streaming services like Hulu, keep one and cut the other.
If you get two Starbucks beverages a day, cut back to one. Or, brew your own coffee.
2. Don’t Neglect Your Emergency Fund
When you’re living paycheck-to-paycheck, you may think that you can’t afford to build an emergency savings account. The truth is, though, you can’t afford not to.
Unexpected expenses are unavoidable. And if you’re unprepared for them, they’ll be devastating to your finances.
You’ll end up getting behind on other bills and racking up late fees. Then, your debt is even worse.
Avoid this by building up your savings now. Try to put at least 10% of each paycheck into savings until you have a decent amount saved up.
3. Pay Off Your Smallest Debt First
When you do pay your debts, pay as much as you can toward your smallest debt. Meanwhile, you can pay the minimum payment toward your other debts.
Eventually, the small debt will finally be paid off and won’t rack up interest anymore. After this, use the same strategy to pay down the next-smallest debt, and so on.
Get Debt-Free Now!
You don’t have to stay stuck in debt any longer. Use the tips in this guide to enjoy debt-free living.
Next, do you want to learn some invaluable information about high-paying careers and how to get into them? Then check out our Education archives located under the Lifestyle tab in our menu bar.