If you have always aspired to reach my goal of financial independence, here are some tips for being debt free that would bring you one step closer to financial freedom.
When it comes to managing personal finances, most people find it difficult to keep their household expenses in check. To add to woes, they increasingly spend more than they earn that prompts a jump in debt outstanding. The answer to all is to become financially smart.
Track and analyze spending: There is no way in the world that you can make required changes to lead a financially stable life unless you are not fully aware of where all your hard-earned money is spent. Therefore, it is time that you start keeping all the receipts for debit, cash, and credit purchases. Thereafter, take some time out to review your spending habits at the end of the month.
Leave home without credit cards: Many studies have shown that people tend to spend 33-35 percent more when they expect themselves to make purchases with credit cards instead of debit cards or cash. Don’t carry the credit card every time you go out for shopping.
Save for a better future: Believe it or not, the average American saves less than a dollar of every hundred dollars earned. Remember, it is easy to save today and things may make it difficult to save tomorrow. Plan for the future as retirement funds will fall short and the cost of living will increase every day.
Avoid impulsive spending: A majority of people tend to spend a fortune on discretionary expenses such as vacations, entertainment, recreation, and other incidentals. If you can cut dramatically on these expenses, you would be left with more money left for saving and paying down debt. In addition to this, you should make it a point to make minimum payments as adding debts would get you nowhere as this will eliminate interest on purchases.
Use of savings to pay down larger debts: It is always a right decision to use a sizeable portion of savings for paying down high-interest rate debts. This is primarily because use of cash reserves for debt repayment is a wise decision as you don’t have to face accruing interest on big balances. No wonder everyone wants to have some extra cash in the bank account but those funds would do nothing for you as the record low interest rates in today’s times would not help you.
Lower interest rate negotiations: It may sound surprising but you can actually get your creditors reduce interest rates based on account standing and payment history. Most banking and financial institutions offer a lower interest rate to customers who have maintained a good and long relationship for a few years. This will help you save a considerable amount of money on interest payments and you can easily pay down that debt over a period of the year.
Doing a credit card balance transfer: Balance transfer is one of the best ways to go on a tear spree, when it comes to reducing the level of debt. This is simply because you can eliminate all interest on credit card purchases by transferring high rate debts to zero percent deals. This not only frees up cash flow, but you would also be able to give up additional money for knocking out credit card bills. However, do make it a point to read the fine print before you sign on the dotted line.
File bankruptcy: The last option is to file for bankruptcy to discharge credit card debts. This should always be used as a last-ditch option for getting rid of debt.
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