cigarettes-621346_1280

5 Ways to Be Debt-Free

How much debt do you have? Debt and debt management can seem like an immense task to conquer but it is an important one to consider when you are thinking about your future. How will your debt affect your retirement? Is it putting a damper in your current living situation or your current lifestyle?

Below are five ways to help you manage your debt. Some of them work in conjunction with one another and some are different options to consider. When considering how to tackle your debt, remember to keep an open mind, reconsider your priorities, and look at all of your options in order to find what will work best for you.

#1) Make a Plan

The key word that you will find in any debt program is “budget”. Being that finances are the root of most of the arguments between couples (the Census Bureau and other public census companies agree that money is the topic most prevalent in arguments), this may be one of the dreaded topics in your household but it is an important discussion to have before you get too far in debt.
For your budget, create two spreadsheets: one for income/expenses and one for your debt. Take a look at how much:

  • Income you have coming in every month,
  • You have in assets,
  • You have in monthly expenses,
  • Debt you have
  • Money you need in order to not accumulate more debt

Try to keep you expenses to less than 30 percent of your income. Limit your frivolous spending to a certain dollar amount each month

#2) The Snowball Approach

The snowball approach to being debt free has you pay off the smallest account first, then (after those are eliminated), apply those payments to your next highest account.

#3) The Avalanche Method

The avalanche method takes the debts with the highest interest rate and flags them as “first priority”. Pay those off in order to save money on interest. Once those are paid off, apply those payments to your next highest interest rate debt.

#4) Making Dollars From Cents

Perhaps it isn’t a method or a plan of payment that you’re looking for but ways to make your determined budget work. Do you have the extra funds to live comfortably while paying off your debt? Where is all that extra money going? If you’re looking to free up some cash every month, check out some of these ideas:

Re-shop your insurance (auto, home, and life) to make sure that you’ve got the plan that best suits you and your family at the best price

  • Downgrade your cable package – do you really want to spend that much time attached to your television set at the end of the day? Are you spending hundreds of dollars of month on one to two hours of mindless TV every night?
  • Cancel unnecessary expenses. For example, take a look at your magazine and newspaper subscriptions. Which magazines are you reading? Or reconsider buying your daily latte or macchiato for home-brewed coffee (which can potentially save you hundreds of dollars every couple months).
  • Temp work or seasonal work isn’t that difficult if you find one in an area of interest
  • Eating out can really add up. Reevaluate how many meals you dine out.

#5) Invest First & Pay Off Debt Later

If you find yourself with some extra cash, what do you normally do with it? You can either spend it or save it, right? If you’ve got a lot of debt lying around, you probably put that money toward paying of those debts – which sounds responsible.

However, there is another option. If you invest that money in your retirement fund or a different investment opportunity, you will be able to put your money towards something that will multiply. Then you can pay off your debt and still have money left over that you can count toward your assets.

There are many factors that must be considered if this is the route that you want to take. Make sure that you aren’t accumulating more debt and that you have a budget that you can stick to. Also, think about your credit score. Make sure that you don’t miss payments in order to keep your credit score high. Consider where you invest your money. If you invest this money in your 401(k), your retirement savings contributions will be (normally) matched by your employer.

There is no magic solution to debt and debt management because solutions depend on the type of situation that you are in. A single father is working a minimum wage job and has five kids will need a different system than a two parent household with only one child. Look for what will work best for you and consider outside help if necessary.

TO LEARN MORE:

We Invite You to Join The Set for Life Community!

SFLBabyBanner

Leave a Reply

Your email address will not be published. Required fields are marked *