How to become debt free, and experience debt proof living is a wonderful feeling, especially if you have always had debt in your life.
Learning how to manage your money better will serve you well in the quest on how to become debt free. All it takes is some discipline and forward planning on your part and debt proof living will become a reality for you.
Unfortunately, most people in these times tend to live on credit and pull themselves deeper into debt as the months and year go by. Before they know it, retirement is looming and they haven’t made enough provision for it.
In the quest on how to become debt free, you need to establish a secure financial base for yourselves for now and for your future. In order to do this, you will need to budget accordingly every month.
We all need to build wealth for ourselves. If we have wealth behind us, we will have the ability to recover a lot faster when unforeseen financial disasters occur.
Many people like to blame others for their financial status. The truth is that there is no one to blame but yourself. You alone are responsible for your own financial future, and it is up to you to build your own wealth and learn to work effectively with your hard earned cash.
Here are some tips on how to deal with your earnings each month in order to experience debt proof living.
How To Become Debt Free
With all the temptations in this materialistic world, a lot of us tend to live beyond our means. We build up debt with credit cards and unnecessary spending, which over time can lead to massive interest payments.
In order to become debt free, you need to focus on repaying all your debt as fast as you can first. You can do so in the following ways:
- List all your debts with minimum monthly payments, interest rates and the total balance due.
- Now write them down from the lowest total balance due to the highest total balance due.
- Work out a strict budget and cut non-essential spending until all your debt is paid off.
- Start with the debt with the lowest balance and add extra money to that one until it is paid up, then move down the list and add all your extra money to the next debt on your list.
- Continue as above until you are totally debt free.
Here are some other ideas on how to become debt free:
- Try to take 15% at least of your earnings each month and pay as much of your debt as you can.
- Consolidate your debt if you can, so that you only have one account to pay your debt into, which makes it much easier than trying to pay little bits to each of your outstanding loans.
- If you do have savings, rather use them to repay your debt, as you will end up paying out more interest on your debt than you will earn from your savings. Remember to keep back a little in case of emergencies.
- While it’s tempting to splurge on a nice holiday or a high-ticket item with that tax refund check, a smarter money move would be to pay down some, or all, of your debt. If you pay in a single lump sum, you will reduce your monthly payments over the next while as opposed to just having short-term satisfaction with your splurge.
- Do a clean up around the house. I am sure you will find some unused items that you can sell on eBay. This is more cash in hand that you can pay into your debt to reduce your interest payments.
- If you have been a good payer in the past, you could try calling your creditors and negotiating a lower interest rate. You have a good chance of getting this right, as they also want to see you repay your debt.
- As a last resort, you could maybe try cashing in some life insurance to help you pay your debt off faster.
How To Experience Debt Proof Living
In order to build financial stability for ourselves, we need to build ourselves a strong financial base.
Think of a pyramid with its stronger and bigger bottom and the smaller top. The reason you should also think of a pyramid is that they are stable and strong structures that have lasted hundreds of years. Now think of your money going into a pyramid from the top and working its way down to get stronger and more stable as time goes on. Think of your pyramid having four corners at the bottom. Your monthly earnings will need to be split into four parts, with each part going into a separate account.
In order for debt proof living to take place in our lives, each month we need to discipline ourselves to do the following:
- Put 70% of your earnings into one account. This is the money that you use for your daily living expenses throughout the month.
- Put 10% of your earnings into another ‘fun’ account. This will be your spending money to have some fun with or to save for future fun.
- Put 10% into a good savings account. This will be for emergencies only and will hopefully gradually build up over time.
- The last 10% should be invested. It can be retirement, shares, unit trusts or whatever method you choose, but this must happen each and every month in order to build up your nest egg. The younger you start, the better off you will be when you get older.
If you follow the above guidelines, you will be well on your way to creating a stable and lucrative financial future. In this way, you will be able to learn how to live debt free and be a financially stronger figure in the future.
How to become debt free just takes a bit of discipline on your part and being careful not to live beyond your means.
With a little bit of discipline on your part you will soon experience debt proof living.
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