You can very well understand that whatever you owe, is called debt.
And, your inability to control the urge to have things that you can’t afford in full, keeps you forever entangled in its chains.
But can we live a life free of debts? I mean, is it even possible?
We definitely can’t imagine a life without credit cards, mortgage loans, student loans, and even for some- payday loans.
We thank God for giving humans the brain to understand, that things can be bought and sold in installments.
Our topic of discussion for today is not unique, as this has been discussed for ages, since the economics was welcomed as a subjective study.
But, time to time, as everything needs to be revised according to new conditions and circumstances, so does this topic, concerning how to be debt free.
So, here we are presenting a creative list of,
4 debt repellant ideas that will help to pay off debts fast, and keep debts away at the same time-
1. Live only on what you earn:
This is the most priceless advice anyone can give you. Always try to blend into a lifestyle that your income permits.
One single step beyond your means, and you just open the door for the debts to enter.
Does this mean frugal living? No, definitely not. It just means you know when to draw the line.
And, this is a habit, or ethic, or whatever you call it, that no one can teach you.
Just like you have taught yourself to be self sufficient, independent, and not to rely on others, the same way it’s time to become “income sufficient” and not be dependent on credit lines or debts.
Instead of taking help of debts to satisfy your hunger of owning goods, it’s better you try to increase your income, that is get more money coming in.
Actually there are so many things you can practice, so as not to let expenses shadow your income. It should be the other way round, where your income is adequate enough to cover expenses.
Most importantly, try to keep your expenditure total at least a few 100 dollars less than your income.
How to do so? Well this is where indeed budgets start to speak. And this is exactly where my next point / idea will serve it well.
2. Make the most out of your income with a well planned budget:
A budget is invariably the most important tool to bring finances in order. It doesn’t really matter how much you earn actually.
What matters the most, is how you can regulate your income and make right use of your money.
And for this all you need to have in hand is a well planned and saturated budget.
Recently I went through the 5/25 rule that was created by Mr Warren Buffett, the well renowned business magnate and investor.
Buffett says, if we can diverge all our wants and wishes, split them into the shape of single expenses, and list them as per their order of priority, then we have nearly sorted out our finances.
After which all that’s left to do, is we need to choose 25 such expenses that we believe we really want the most.
Then once we have selected these 25 expenses, it’s time to select 5 expenses from these 25, that matter the most or is- the ultimate- priority ones!
And he insists, that these 5 expenses actually what you should take care of rather than the other 20 expenses!
I know Buffett is confusing, but hold on, I am evening it out for you.
Buffett uses this rule for investments, and betterment of life goals.
While you on the other hand, can use this to meet your personal finance goals and debt obligations.
This 5/25 rule is just an improvised version of zero based budgeting. As per zero based budgeting you will be prioritizing your expenses one by one.
Each of your expenses will be having an amount limit, which will mean – ‘you can’t spend more than this, on this’!
It’s quite obvious that if you have big debt amounts, then they will become your top priorities along with savings and bill payments.
And, your other monthly expenses can follow up as per your need and wants.
Hence, maintain such a budget to control your expenses and increase financial stability.
3. Don’t miss out on debt consolidation and debt settlement if you get the opportunity:
Many people actually die trying to get the best debt consolidation programs or getting a good settlement deal for their debts.
And then, there are those who spend long days in procrastination, and don’t put in the effort to get rid of their debts and live a decent life.
So, if you ever come across a good settlement deal, or a good and authentic debt consolidation company, then don’t hesitate to go for it.
My suggestion however is a bit drifted one! You should work with professionals for debt settlement, while consolidation you can pretty much do it yourself!
Settlement involves heated discussions and negotiations to reduce debt amounts, interest rates and other associated fees.
For general consumers it gets really difficult to converse with a creditor and make him agree on a settlement deal.
But debt consolidation is practically not that complicated, and you can kind of do it yourself (DIY).
If you want to consolidate your debts, then you can take out a consolidation loan offered by banks and pay off all your debt amounts with that loaned money.
After your previous debts get cleared, you will only have this new loan to pay off.
Don’t worry, consolidation loans are designed to help consumers manage debts. You will see that these loans carry decent interest rates!
To be precise, way lower than what your current debts are having.
Also you have the credit cards balance transfer method, if all you are having is hefty credit card balances, and you are just desperate to control your credit card debt.
By balance transfer, you take out a new credit card and import all your other credit card balances into this one, and therefore you will have only a single credit card balance.
And if you are lucky enough, then you might also be able to get a 0%APR introductory period for the balance transfer card that will help you to reduce interest costs on your debts.
Therefore, Therefore, don’t be late in choosing your best way to consolidate debt.
Have a close look at the market, check out the best balance transfer cards and good debt settlement companies that can actually help you lower your debts.
4. Never misuse credit cards, and try to have low balances on them:
Credit cards are incrementing in their importance level day by day.
It looks like we have debit cards just for name sake, as most of our purchases are done with credit cards.
But, don’t you think most of us have huge credit debt just because we misuse them? Well that’s what the majority of financial advisors are believing in.
They say we should use credit cards only for things that we need badly but can’t afford them with our debit accounts.
Hence, it’s better to save up money and then buy a Macbook with your debit card, while paying off an emergency medical expense is better done with a credit card!
I just gave you an example, so as to understand the potential use of credit cards. The rest is totally upto you.
Also, if you tend to keep and maintain low balances on your credit cards, then you have more room in them for future expenses, plus your credit score will also increase with time.
So, it’s not that your job is done with clearing balances on credit cards, but you should take suitable measures to remain debt free, and plan future finances after paying off credit card debt.
Hope, this post was not too much to grasp at the same time. Actually debt is a very diverse topic of discussion, and if not anything, it demands time.
I won’t give you the false hope of breaking down debts in a few days war! Debts can even take years to be cleared.
Take your time, repay all your debt amounts, and don’t let debts leave a mark on your personal life!
About the Author
Chris served on the Board of Directors for Habitat for Humanity
Seattle/S. King County for 10 years and served as Vice President
of the organization during part of that time. Read More