Debt Free

Debt can weigh you down like nothing else in life. Too much leads to a low credit score, higher interest rates, and fewer financial opportunities – which can then lead to even more debt. It will remain a never-ending cycle unless you take action. When you’re ready to get serious about fixing your finances, just follow these five steps to becoming debt free:

1. Start budgeting your money wisely.

Begin by making a list of expenses; the money you owe will be one of them. Decide how much you should spend on bills, food, savings, and free spending every month. Then stick to your plan as though your financial future depends on it. Keep track of every purchase you make, and once you reach your decided spending limit, don’t advance more money to yourself! You’ll never get out of debt that way. You need to make more than you spend every month, and if you’re advancing money, you’re probably spending more than you make. Get a second job or start donating plasma if you need extra cash. Just don’t keep burying yourself deeper in debt with frivolous spending.

2. Cut back on unnecessary costs at home.

The less you spend on things you want – as opposed to what you need – the faster you can get out of debt. Many people honestly believe there’s no room to reduce costs in their budget. However, upon taking a closer look, most can find opportunity for adjustment. Look over your bank and credit card statements from the last few months. First, try to reduce your monthly bills. For instance, could you downgrade your cable package or cell phone plan? Could you use less energy or gas? Next, total all unnecessary purchases you’ve made recently. You may find that costs (e.g., for restaurant outings, clothes, video games) can be cut -at least until you’ve gotten out of debt.

3. Manage your credit like a pro.

On each account, see how much you owe and check the interest rate. Keep only 2 or 3 accounts with the lowest interest rates. Close the rest. To make this easier, consider paying off your high-interest accounts with the low-interest credit cards. Alternatively, you could begin making the minimum payment on your low-interest cards, while paying as much as possible on the high-interest ones. Either way, you shouldn’t be paying the bare minimum on every account. It’s just not effective. Of course, there is another option. You could get a credit card with 0% interest for the first 6 months to 1 year, transfer all of your debt to that account, and pay it off before the higher interest rate kicks in.

4. If you’re absolutely drowning in debt, seek professional help.

Many businesses specialize in debt consolidation and settlements. The best ones are 100% worth the investment; companies like Debt Liberty have helped thousands get out of debt. In fact, the Debt Liberty staff has settled more than $5,000,000 in customers debt. No matter which company you work with, professional help may drastically reduce your monthly payments. This may be all it takes to finally escape financial problems. It’s worth looking into at the very least. There’s help out there for people wanting to become debt free; all they have to do is ask.

5. If you don’t have the self-discipline to handle credit responsibly, learn to live without it.

Pay off your debts and start saving for emergencies. Don’t open credit accounts under any circumstances. If you want to make a major purchase, wait until you have money to buy outright. Then you won’t have to pay interest or deal with another bill weighing you down. It would be wise, however, to start an emergency fund in this situation. Since you won’t have credit to cover surprise expenses, you’ll need a back-up plan. Aim for $1,000 to $5,000 in savings. Keep this money in case you’re hit with unexpected expenses. Becoming debt free is a challenge, and unless you’re prepared, staying that way can be ever harder.