Once
you are in debt, it can seem impossible to find your way out. Having unpaid
debt also causes an enormous amount of stress and anxiety that can have an
effect on your overall health and well-being.
While it may not be easy to get out
of debt it is possible. Even on a limited budget, you can navigate your way
back to a debt-free life by the following the steps listed below:
Step #1 – Make a
Promise to Yourself
Start carving your path towards
financial freedom by making a promise to yourself that you will not acquire any
new debts.
Getting out of debt usually
requires making some sacrifices along the way. But you have to commit to living
within your means and not spending more than you earn. Make a list of all of
your current debts and the grand total. Not adding anything to this number is
absolutely crucial for your financial success.
Step #2 – Stick to
Your Monthly Payments
It’s important to remember that
getting out of debt is not a sprint, it’s a marathon. Figure out exactly how
much you can afford to pay off each month and stick to it, no matter what.
Even if you can only afford a small
monthly payment, paying something is better than paying nothing. And chipping
away at your debt with consistent effort adds up to big results. Don’t get
discouraged if it takes a while to see the light at the end of the tunnel.
Dedicate to paying a certain amount each month and you’ll be debt-free before
you know it!
Step #3 – Rank
Your Debt
When organizing your debt, rank it
in two ways: lowest to highest balance and lowest to highest interest rate.
Compartmentalizing your debt
according to balance and interest rate will allow you create a plan of action
for tackling your debt. These lists will help you figure out what should be
paid first to avoid accumulating interest and how long it will take you to
completely payoff each debt according to your monthly payment schedule.
Step #4 – Clear
Your Small Debts
Your first list should include the
debts with the smallest balances. Focus on paying these debts to quickly gain
some momentum towards being debt-free. Send extra payments only to those debts
that can be paid in 3 months or less while paying the minimum on everything
else. You may find yourself getting rid of several small bills early. These
small successes can help catapult you to paying off your larger debts.
Step #5 – Attack
Large Debts
The second list you make should
include any debt that will take longer than 3 months to pay off. But don’t
worry, now that you have experienced success when crossing off your smaller
debts, the bills on this list will seem much more achievable.
Don’t let expensive debts stand in
your way of financial independence. Once again, pay only minimum payments to
everything except the bill with the highest interest rate. Stick to your plan
and watch as your debt gets smaller and smaller every month. With consistent
effort and serious commitment, you can be debt-free much sooner than you may
think.
Step #6 –
Celebrate!
Digging your way out of debt is a
huge accomplishment. Now it’s time to celebrate, enjoying the peace of mind and
freedom of being debt-free!
