3 Methods to Become Debt Free
The first step to living debt-free is to come up with a game plan and stay true to it. While it may seem easier said than done, the secret to targeting a debt-free life is a lot like sticking to a diet--it takes time, consistency, and patience. Here are a few ways you can tackle your debt and be on your way to saving.
Slow and steady wins the race. The debt snowball payoff method isn’t a fast process, but it will keep you motivated to reach the finish line. Through this method, you can tackle your smallest debt first and then continue to make those payments toward your second-biggest debt and so forth. If you’re not sure where to start, you can use a debt snowball payoff calculator to determine the best route for you.
Similar to the snowball method, the debt avalanche method targets one debt first before moving on to the next. But in this case, you start by paying off the debt with the highest interest rate before moving on to the next highest interest rate and so on. This approach can not only help quicken the process but also save you money spent on interest throughout your debt payoff journey.
If you can qualify for a lower interest rate, then debt consolidation might be the right path for you. Debt consolidation combines multiple debts into a single new loan to help make payments more manageable and, sometimes, even shorter. You can secure a personal loan to compile multiple credit card debt and more so that you only have to worry about one payment, interest rate, and due date.
3 Pointers to Stay Debt Free
Getting rid of debt is only half of the equation, the other half is to take on a debt-free lifestyle. That means making conscious decisions to not only keep you out of debt but to get you further away from slipping back into it. While multiple money management routes lead to the same destination, these are a few that are easy to follow for long-term rewards.
Stretch Your Food Budget
We all have those days where cooking is just another chore on your to-do list after a long day. But opting for a sit-down dinner at a restaurant on the weekends or a drive-thru meal after work offers short-term satisfaction with a long-term effect on your financial goals. In fact, the average American household spends about $3,000 a year on dining out! That sounds like it could be a big contribution to your savings instead.
Cut the small expenses by planning out your groceries for the week and dedicating one day a week to meal prepping. This not only eliminates the temptations to eat out but also condenses overall cooking time.
Set Long-Term Savings Goals
Now that you’re financially free from debt, it’s time to put your energy toward the next financial goal. So, before you lose the rhythm of making monthly debt payments, it’s time to dedicate that money toward the next best thing--savings. The key to staying out of debt is to build your savings so you’re ready for the next curveball that comes your way. Your first savings goal should be to build an emergency fund equipped with three to six months of living expenses, then you can shift your focus toward the next financial milestone, whether it’s to save for retirement or your dream home.
The best way to improve your financial management skills is with practice. Through just a quick Google search, you can gain access to thousands of financial resources that can help sharpen your skills while giving you tips on how to save, invest and grow. From learning the steps to becoming a first-time homeowner to starting a savings plan for your child’s college funds, there are workshops, podcasts, videos, and blogs that can offer guidance. Check out these free audio playlists during your morning commute or evening strolls for some quick tips that are personalized to your financial goals.
Commit to a Debt-Free Lifestyle
Once you go debt-free, you’ll never go back. Whether it means creating a monthly budget, dedicating a certain percentage of your paycheck to savings, or cutting back on small expenses, it’s important to find a plan that works for you. For more on how to manage your finances, take a look at these tips on how to save for a long-term budget!