Tips To Get to a Debt-Free Life

We live in a world where credit cards and debt are quite common. Most people live paycheck to paycheck, just trying to stay afloat. Many reach for their credit cards whenever money is too tight. However, that isn’t always the best. Many go to a debt-free life and decide that they won’t go back!

So, what does a debt-free life look like?

You have extra money to do something fun each month. Imagine if you weren’t paying three hundred dollars for your debt each month. You would be able to go out to eat, without worrying if your check is going to bounce.

Likewise, you would be able to buy the new coat that you really need, without checking your bank daily to see if you have enough money to get it. You may be able to save for a vacation, instead of taking out a loan (or using your credit cards).

You may also put more money into your savings to help in an emergency. If you started putting two or three hundred dollars in your savings each month, could you imagine how fast it would grow? If your car needed to be repaired, you could just use your savings, instead of panicking and trying to figure out how you are going to swing it. If an appliance goes up in your home, you would just be able to replace it.

You can also start to prepare for the future. Most people are not prepared for the future. They don’t have enough savings to be able to relax and enjoy the future. They still use credit cards and other debts to get by. If you want to be able to relax when you retire (and do whatever you want to), without worrying about money, you should start saving now. It is never too early to start planning for your retirement.

Here are some tips to help you achieve your goal of living a debt-free life.

Many people, like Dave Ramsey, recommend the snowball method. The snowball method means that you pay off your debts from the smallest to the largest ones, no matter what the interest rate is on each of them. You will pay the minimum amount on all of your debts, except for the one with the smallest balance. You should pay extra on that one, until it is gone. Then, you go to the next lowest one, until you have paid them all off.

Though it may feel counterproductive because you may be paying more money on interest with some of your higher credit cards, the truth is that you will start to see the balance go down, until it is all gone. This will help to motivate you to continue to pay off your debt, until you can finally say that you are debt-free.

Others prefer the avalanche method. This method involves working on paying off the card or debt with the highest interest rate. It will save you money in the long run because you get rid of the debt that costs you the most monthly. For example, if you have a credit card with a twenty percent interest rate, you should focus on that, instead of paying off your car at a five percent interest rate. Once you have the high-interest rate card paid off, you can go to the next highest one, until your debt is paid off.

However, these methods only work if you have extra income to put toward your debt. If you live paycheck to paycheck, you may only be able to afford the minimum payments. In fact, you may have to put a few things on credit cards each month just to get by. However, if you truly want to live debt free, you will have to find ways to put more money toward your debt. You may be able to find a seasonal job to help bring in some extra income. You may start a small business in your spare time to help.

Not only that, but you may also find ways to cut back on your expenses. You don’t really need to go out to eat every week. Having date night at home with a movie and a nice homemade meal may make a difference. Can you imagine how much quicker you could pay off your debt if you didn’t go out to eat every week? What if you could cut back on your cable or phone bill? Little things can make a big difference. It often helps to make a budget.

There are two methods to get rid of debt. You can try the snowball method, where you pay off the lowest debt first. This helps you to see progress, so you continue working toward the goal of becoming debt free. The avalanche method pays off the highest interest rate debt first, saving you interest money. Either way, you have to be dedicated to becoming (and staying) debt free!

Previously published on Medium and/or Newsbreak.