Debt-free living strategies

It may also prevent you from saving up enough money to purchase a car without financing it, forcing you to go into more debt. Monthly debt payments hold you back from moving forward. When you are saddled with excessive debt, it interferes with the choices you can make in life. High debt levels keep people stuck in jobs they hate and trapped in troubled relationships far longer than they would without the added financial weight.

Monthly debt payments can prevent you from pursuing dreams, realizing your potential, building wealth, and generally living life on your terms. Working towards becoming debt-free is one of the most powerful decisions you can make to improve your quality of life. One of the biggest mistakes people make with debt is to ignore it.

Take a hard look at your balances and get clear on your numbers. If your goal is to be debt-free, you have to stop accumulating debt as soon as possible. That may seem to go without saying, but the problem is this is often easier said than done.

If you are addicted to shopping, you may need to get support from a therapist to curb your spending. If you are overextended and relying on credit cards just to get by, you may need to drastically reduce your cost of living by selling your house or cars. It will be difficult, but you have to stop the bleeding before you can save yourself.

A debt snowball is a debt repayment method that works by tackling one debt at a time. The idea behind this method is that quick wins will provide a sense of accomplishment and motivate you to keep going. So if you pay off small debts you will gain confidence that you can tackle your bigger debts over time.

A debt avalanche focuses on paying your debts with the highest interest rates first. The idea behind this strategy is to pay as little interest as possible so that your debt is less expensive over time.

Either way, the trick is to always pay more than the minimum required payments and put as much money as possible toward paying down your debt, which requires cutting back on your expenses and finding ways to increase your income.

For some people, a debt consolidation loan can be helpful. While it does not generally reduce the amount of the debt itself, it can potentially lower the amount of interest you are paying, reducing the overall cost of your debt.

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Subscribe to the Select Newsletter! Here are a few tips to consider when designing your own debt-takedown strategy. Know what your debt amount is Once you've made the decision to pay down your debt, the first step is to find out exactly where you are and what you're up against, which may in fact be the most excruciating part of your journey.

This strategy suggests you eliminate the smallest debt first and work your way up to the largest. While doing this ignores the math of interest rates and other factors, it focuses mainly on the psychology of momentum. Conquering the small debts first will help you mentally tackle your larger debt balances.

Debt avalanche: Best for those who enjoy working with numbers and knocking down your overall debt, this system suggests eliminating your highest interest debt first while making minimum payments on the others.

This will help you save the most on interest charges. Debt consolidation: Instead of having five or six debts to tackle, it can be helpful to put everything in one singular place through debt consolidation. For example, I recently consolidated my car loan and student loans through a personal line of credit , which has saved me money in interest and lowered my stress level when it comes to tracking numerous debts.

If you have multiple credit card balances to pay off, consider grouping them together. Debt counseling: If you're facing significant debt with limited ways of paying it off, consider credit counseling so professionals can help you settle your debt and get you started on a repayment plan.

Learn More. Information about the U. Bank Visa® Platinum Card has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication. Rewards None. Annual Percentage Rate APR Create a budget and cut out discretionary spending Creating a budget may sound like such a bore, but it's one of the most important parts of building a debt paydown plan.

This kind of steadfast discipline frees up more money to attack their debts. With each debt they pay off , their confidence grows by leaps and bounds. No-brainer, right? Debt-free living is a goal , so people who want to accomplish it keep that objective in front of them.

They set goals that are specific, measurable, time-sensitive, yours and in writing. And they figure out what they want to do and map out a strategy to make it happen. We bought land last year for our future home. This year we bought a fifth wheel so we can continue living with lower expenses and save money [to build].

Avoid the traps and manage your money the right way with Financial Peace University. Eating out, going to movies every week, and getting the premium cable package—these are the types of things a person might have to avoid while becoming debt-free.

But keep in mind: Budget cuts are just temporary. Debt-free people know that they have the freedom to live and give generously. They know that the more they keep their hands open, the more fun they can have with money. You need a plan that will help you get from where you are to where you want to be: living a debt-free life.

Get that plan in our nine-lesson course, Financial Peace University.

Consider Credit Counseling Explore Comprehensive Repayment Solutions Commit and Stay the Course

Debt-free living strategies - Dive into Proven Debt-Free Strategies Consider Credit Counseling Explore Comprehensive Repayment Solutions Commit and Stay the Course

That said, she also remains pragmatic in her views regarding debt: "I've learned not all debt is bad debt," Beltran says. It's about finding the right financial mix for your situation.

Living debt free has also given Beltran a new sense of freedom — she is now living in New York City once again — this time without roommates — and focuses on investing for the future. Alex Melkumian, founder of the Financial Psychology Center in Los Angeles, says becoming debt free is connected to understanding what's important in your life.

Those striving to be debt free have to manage their expectations and emotions, says Melkumian, since some will not be able to immediately afford buying a house or new car after paying off their debt. He adds that while no strategy is perfect, aiming for perfectionism isn't the best approach.

It's better just to get started than overthinking what strategy may be best for you. Once you've made the decision to pay down your debt, the first step is to find out exactly where you are and what you're up against, which may in fact be the most excruciating part of your journey.

Then take stock of every debt you have. Write down the balance, interest rate and minimum payment for each. Finally, add all of the balances together to know exactly how much debt you have to pay off.

Here are several well-known methods to help you pay down your debt:. The U. Or consider taking out a personal loan to consolidate any high-interest debt. A Happy Money personal loan is a good choice for those who want to consolidate their debts.

Whichever plan you choose, try to stick to it. This will be your foundation for getting out of debt. Creating a budget may sound like such a bore, but it's one of the most important parts of building a debt paydown plan.

By doing this, you can figure out a nearly exact date of when you'll officially be debt free. As you create a budget, do your best to cut out discretionary spending, as this particular category of spending is where budgets can get significantly dragged down.

Whether it's regular trips to your local coffee shop or shopping sprees on Amazon, cutting down on non-essential spending will allow you to redirect any cash towards your debts. Consider using a free budgeting tool offered by Mint or Empower formerly Personal Capital to help you create a budget and track your spending.

Whether your debt payoff date is a few months away or several years away, enjoy the moment when it finally arrives — but make sure you have a plan to remain debt free. However, once you become debt free, it is possible to use credit cards as a cash alternative to earn rewards for regular spending so long as you pay off your card in full every month.

Like any tool, it's all about how and why you use it. While personal finance can be about running numbers to see what makes the most sense for your financial goals, that simplification misses the point — personal finance is personal.

There is nothing wrong with not aggressively paying down low-interest debt as long as you're taking care of your emergency fund , putting money away for retirement and accomplishing other personal finance goals. However, for some like Beltran, finding a new sense of peace by being debt free simply supersedes the math.

If you aspire to live debt free, following a few steps — calculating how much you owe, choosing a paydown strategy, creating and sticking to a budget and formulating a plan to remain debt free once you've achieved that goal — will help make your debt-free dreams a reality in no time. Catch up on Select's in-depth coverage of personal finance , tech and tools , wellness and more, and follow us on Facebook , Instagram and Twitter to stay up to date.

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Now, if you do this math and realize you have a budget deficit your expenses are higher than your income you know two things: First, this is probably what got you into debt in the first place.

Second, you need to make some lifestyle adjustments in order to set yourself on the path to a debt free life. A financial advisor will be able to look at your specific situation and make recommendations for adjusting spending habits that will set things right. Once you determine how much money you have each month to use towards paying down debt, you need to decide what strategy you should use.

There are a few worth mentioning:. This strategy involves paying down your lowest-balance debts first. The idea is that, in the same way a tiny snowball gathers additional mass and momentum as it rolls down a hill, by checking smaller debts off your list, you too will gain momentum and motivation as you roll down the hill of your debt repayment plan towards the sunny valley of a debt-free life.

If, however, you have fewer debt sources, or all of your debt sources have relatively high balances, this may not be the best option. Where the debt snowball strategy prioritizes good vibes and motivation as you walk the path to debt-free living, the debt avalanche takes a colder, more mathematical approach.

It dictates that, rather than focusing on what feels the best, you should pay off your debt in such a way that will save you the most money over time. So, focusing on eliminating the debt with the highest interest rate first. This is more mentally taxing, since, especially if you have a sizeable chunk of credit card debt, it may take you years to be able to pay off a balance, which can be demoralizing.

The basic idea is simple: you get a personal loan and use it to pay off all of your other debts, consolidating your debt into a single, monthly payment, which is usually less than the combined payments you were making to all of your other creditors.

Such companies Best Egg and Upstart are two prominent examples offer personal loans to individuals for a variety of reasons, though consolidating debt tends to be one of the most popular ones. Which strategy will best get you to a debt free life depends on your specific situation. Sometimes, people go into debt because of an unavoidable situation, like a pricey medical procedure or an unexpected car repair.

Other times, debt is the product of a series of financial decisions a person makes. Understanding your behavioral patterns is the first step on the journey to changing them, which tends to be necessary for anyone hoping to turn things around and live debt free.

As it turns out, stress is detrimental to your physical and mental health. It can be the cause of all sorts of nasty problems, from anxiety and depression to heart disease and high blood pressure. Eliminating such stress also has quite a few health benefits , from being more creative, to having more self esteem, and getting better sleep.

So, here are four steps you can take to set yourself on the path to living debt free:. Why is living debt free better? Living debt free means you have absolute financial freedom rather than being shackled to monthly payments, which has so many benefits.

The lack of stress associated with living debt free can improve your physical and mental health, lift your credit score high into the sky, make you feel better on a general level, improve creativity, unlock opportunities to take advantage of savings or grow wealth, and so much more.

Not really. This means you can still have and use credit cards, thus building credit and bumping up that credit score while also enjoying the financial freedom of not having any long-term obligations that weigh you down mentally and financially.

Any debt that is going to cost you money is bad debt and you should do whatever you can to eliminate it as soon as possible, even if that means making adjustments to your spending habits so you can make more than minimum payments every month.

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We’re Debt Free… Now What? A Happy Money personal loan is a good choice for those Dbt-free want to liviing their liing. Add etrategies header to begin generating the table of contents. Debt consolidation strategies much Debt-free living strategies livnig you make in reducing your debt within the next year? Here are 5 Simple Steps to Create and Maintain a Budget. And they can change yours too! As far as higher education is concerned, students willing to take out loans certainly have more options, and many wisely choose to go this route. Plus, the internet has made the benefits of libraries even better. 10 Characteristics of Debt-Free Living

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