Financial debt is the money you owned to someone or an entity. This financial debt could be in form of credit cards loans, mortgage, car loan, student loan and so on. Not everyone wants to be in consistent debt, but majority of people find themself in this situation without a clear way out. About 28% Americans have credit cards debt with collections agency, another 35% rely on auto loan to pay off a car, and about 60% Americans home owners have mortgage. With the current inflation, about 64% Americans now live paycheck to paycheck. More and more people doesn’t have any cash buffer for any unplanned expenses, indicating more and more people will end up in debt. So, with this stunning statistics, what can you do as an individual to become debt free?
Here are simple but practical ways to be D.E.B.T free….
Dos and Don’ts….
Defer unnecessary purchase and Don’t defer credit card payment. Have you ever purchase something you don’t really need or even want but just ended up buying it anyways because it feels like the best deals at the time and if you don’t buy it, you will be missing out of the greatest deal of your life? Well, if your answer is yes, then you are not alone. Before I got myself and spending habit under control, the sight of percent off coupon in my mail box or a 40% off coupon in my email from my favorite store basically means I have to just go in there to see what they have in store and hopefully find something that I might eventually need in the nearest feature. No matter how tired I was, I always ended up in the store to pick up something because I can’t just stand the chances of not utilizing the couple. Well, the advertising industries knows very well how to play with our wants and manipulate us into thinking that we are getting a discount off an item. The bitter truth is that, the have not spend a lot of money on an item all just to give it to you free of charge or to even sell it at a price where they are not making any profit off you. We end up buying what we don’t really need at the moment. The saddest part of this is actually placing this purchase on a credit card. Imagine this for a moment… You bought something you don’t need, using the money you didn’t have and never getting to use this item. How pathetic is that? The simplest way to stay out of debt is to Defer purchasing things you don’t need. You have all the power within you to DO this. Don’t feel compel that you need to buy something you don’t need right away, especially when you don’t have the money.
The “Don’ts” of staying off debt is to not defer payment of credit card, car loan or whatever loan you may have. This is because deferring payment only lead to penalty and higher interest. The faster you pay off your debt, the faster you become debt free. Its as simple as that.
Earn more money. Yes, in order to be debt free, you need to make more money to pay off your debt and to continue to live a debt free life. Losing a job or temporarily stopping making money (due to unexpected reasons) is not certainly a great option if you want to be debt free. In order to pay off you debt on time, you may want to take additional job, or temporary work for more hours pending the time you are off debt. Even in your current job position, do you need additional certification, training or skills that could lead to promotion and pay rise? Sometimes the idea thing to do may be to change job/company because most people that change job often see a salary increase compared to counterpart that remains with the company. Don’t feel guilty if you have to move from one organization to another because you wanted to make more money. Remember, whatever you take home is your sole benefit. So, put in your effort where you get the most reward.
Budgeting. More than 56% of Americans do not use budget to manage their money, and even a larger percentage don’t know how much they spend in relation to how much they earn. No wonder a lot of people live paycheck to paycheck because they do not really understand that budgeting is one of the simplest ways to track their spending habit, reach their financial goals and become debt free. Budgeting is about taking control and staying in the driver seat of your financial goals. If you got to be debt free, you’ve got to know how to budget and stay on budget. Without budget, how can you know where your money goes and what category you spend your money mostly on? How can you balance all expenses during the month as well as your savings without budgeting? Budgeting is all about mapping out what the needs are and what you plan on spending on it and also outlining your actual expenses and showing what they cost at the end of the cycle. This is a great way to show you which categories you are overspending, which ones you can spend more or how much you can be saving. By constantly sticking to your planned budget, you might be able to spend less on entertainment, impulse items or other categories, which helps you avoid unexpected debt or pay off current debt. For more resources on budgeting.
Total control of your finances. In order to be completely debt free, you have to take full control of your finances and you have to monitor what comes in and what goes out. The “dos and don’ts”, “earning more” and budgeting” I talked about are ways to take full control of your finances. Another way is to be actively mindful of what you purchase and monitor your credit card usage. It is extremely dangerous if your credit card has been used without any purpose. People rarely check their credit card statement until it is due. Additionally, checking your card balances weekly can also alert you to any unexpected issues. If you catch something suspicious early on, it may be easier to resolve with the bank. Another benefit of checking your credit card balance is to help you make payment on time and avoid any late payment penalty.
Simple Dos and Don’ts to be debt free...
…Defer unnecessary purchase but Don’t defer your loan payment
…Earn more money and Don’t spend all
…Budgeting and Don’t go off you spending limit
…Take total control of your finances and Don’t make any unwise decision.