It might seem impossible, but a lot of people have succeeded in going completely debt-free. It’s definitely not an easy task, but if it’s something that you truly want, you should commit to it and select a system that works for you.
Here are some useful tips to help you live a debt-free life:
Stick to a Budget
The first thing you need to do is keep track of what’s coming in and going out. Being more aware of your cash flow will help you fight off excessive spending. At the same time, cutting your life down to its bare bones is just a temporary solution. It’s not sustainable, especially if you’re spending your nights sitting in an empty room, eating rice and beans.
As you are drafting your budget, make sure that your current income can realistically cover all your bills, expenses, and savings allocation. Otherwise, it might be time to ask for a raise, find a higher-paying job, or look for a side gig that can bring in more money.
Tackle Your Debt Head On
If you have a sizable debt, you should be honest about how much you owe and how you got to that point. Most people have a hard time admitting to themselves just how big of a hole they are in. While it is tough to get out of the red once you are facing interest payments on arrears, it is not completely impossible.
Below are some great tips that will get you on the road to earning interest, and not paying it:
- Don’t dodge your responsibilities. Try to make at least the minimum payments on all your outstanding accounts.
- Pay off all your debt as quickly as possible. If you can afford to do so, always pay your creditors more than just the minimum. In fact, if you come across a windfall, use it to pay off your debts.
- Consult with debt counselors and advisors who can help you explore your options before legal action is taken against you. They can recommend steps such as filing for bankruptcy or undergoing the Consumer Proposal Process in Northern Ontario.
- Don’t suffer in silence. If you can’t settle your obligations, contact your creditors and ask if they can reduce your debt or if it’s possible to be placed on a payment plan until you can get back on your feet.
Have an Emergency Fund and a Large Savings Account
Most people use their credit cards during emergencies. However, using your credit card when you are already in financial trouble can be risky. Instead, use whatever extra money you have that’s not allocated towards debt payment to build your emergency fund. This will keep you from accumulating more debt than you can afford when something unexpected comes up.
As soon as you reach your goal amount for your emergency fund, start saving up. You can use your savings to supplement your retirement account or for long-term expenses that you see yourself making in the future such as a new home or your child’s education. You can also use this for bigger expenses such as a family vacation or new appliances.
Live Below Your Means
The adage that you should never spend more than what you could afford can be tough to live by. With the endless sea of credit deals and promotions, it is so easy to borrow more than what you need and go into debt quickly. As much as possible, live below your means. Living frugally means that you live a modest and practical lifestyle.
Here are a few examples of living below your means:
- Look for ways to reduce your expenses, such as using cash back apps and coupons when shopping for necessities.
- Consider cutting down your subscriptions for services that you don’t need, such as cable. Always research to make sure that you are not overpaying for those services that you actually regularly use.
- Find easy and delicious recipes online so that you can dine at home instead of going out.
- Before buying things that seem like a good deal, always ask yourself if you really need them.
- Find free and fun things to do in your spare time, such as reading at the library or volunteering at an animal shelter.
- If you find it hard to stop impulse shopping, switch to debit cards so that you understand that you are spending money that you actually have.
Today’s society is one where wealth determines a person’s success and future. This is why people strive hard, work smart, and invest in things that will allow them to achieve their goals in life. Debt can put these goals in the back-burner. Living a debt-free life can be challenging, but it is possible with dedication and perseverance.