How to Become Debt Free

 

The consequences of their undesirable money habits and make for a bleak financial future. No one is sure about what can happen in the future, but it’s about time that people start thinking about properly managing their finances. The first key is to become debt free.

Financial problems start at home, where families normally neglect checking on their expenses and sometimes even spending more than they can afford. In fact, in the last 15 years, income for middle American household only incurred an 11% growth, whereas debt jumped to staggering value of 80%.

The same thing goes for consumers and businesses. People have bought things that were really out of their budget, and as result, they have no choice but live from paycheck to paycheck. However, financial problems, especially debt, can be resolved, but people need to be fiscally smart first.

The first thing to do avoid being buried in debt for a long time is to start being practical. People need to realize and be responsible regarding financial matters. They can follow some noteworthy tips, which can help in improving their money management skills and in preparing for their future financially.

  1. TRACKING AND ANALYZING EXPENDITURE

People normally do not care about where their money goes to. However, before their debts start piling up, they should start analyzing where every penny that they have is spent on. People should start keeping receipts for all their financial transactions. Then, they should keep track and determine any pattern on how they spend their money every month.

  1. DEVELOP SPENDING PLAN

To save more money, it is important that people spend only according to their needs. They should also recognize and buy only the things that they truly need. Moreover, people should think twice before spending money on anything. Likewise, they should develop additional management habits that can help them in making wise financial decisions along the way.

  1. GO OUT WITHOUT YOUR CREDIT CARDS

Research has shown that people are more apt to spend if they have their credit cards with them. Thus, people should try going out without those plastics to avoid being tempted to buy unnecessary things.

  1. PAY OFF DEBTS WITH HIGHER INTEREST RATES

People should face their debts and focus on those with higher interest rates. They should prioritize on paying such debts first and finishing all payments as early as possible. This way, they will not only minimize their debts but also prevent incurring additional fees that can be attributed to higher interest rates.

  1. SAVE MONEY FOR THE FUTURE

Americans are not popular for saving money. However, it is about time to change that undesirable habit. People should begin saving for their future and do not just depend on what they can get with Social Security. Statistics has shown that around 78 million baby boomers have increasing debt problems. According to experts, the numbers will possibly still rise given the increasing cost of living and lack of retirement funds.

  1. THINK TWICE BEFORE SPENDING

Outright spending is what normally causes people to have debts. Spenders are known for indulging themselves in entertainment, recreation, vacations, branded clothes, and other habits that require money. However, people can save more money if they stop or minimize their engagement in such activities.

  1. AVOID INCURRING ADDITIONAL DEBTS

People should just focus on paying their current debts and not incurring new ones.

  1. AVOID USING CREDIT CARDS

If they cannot pay off the debt at the end of the month, people should just forego buying and using their credit card. This way, they won’t have to pay any interest that comes with credit card purchases.

  1. AVOID MAKING ANY FINANCIAL PROMISES

The number of defaulting cardholders is continually increasing. And the increase is also observed in home foreclosures and auto repossessions. Meanwhile, about $7 billion of student loans are delinquent debt. However, the government seems to be intent on implementing iron hands on late student loan. It can incur penalty through seizing Social Security benefits in order to collect delinquent payments. In the same way, lenders assume that borrowers and co-signers will keep their word and pay off their debts as they promised.

  1. CONSULT LICENSED CREDIT COUNSELING AGENCY

Some people may have hard time resolving their financial problems. In such cases, they may seek the help of legitimate credit counseling agency that is part of the National Foundation for Credit Counseling (NFCC).