3 Financial Changes That Put You on a Debt-Free Road
Overwhelming debt can compromise your peace of mind and financial stability at once.
By employing a few wise money management and debt-reduction steps, you can extricate yourself from the chains of indebtedness while reclaiming a sense of financial security. Discipline is key where achieving that security is concerned, but the subsequent rewards are all very much worth the effort.
Financial Tips to Help You Get Rid of Debt
There are many roads to becoming debt-free, with no single step taking precedence over the others. It is always situationally dependent. That said, wise restructuring of existing debts, strict savings goals, abstaining from assuming new debt, and managing your money in a generally more responsible manner are all advisable.
1. Refinance Your High-Interest Loans, Invest Subsequent Savings
Not all debts are equal in terms of their dollar amounts, interest rates, payoff terms, etc. Much of the debt presently burdening Americans is structured unfavorably for the borrower. Fortunately, the concept of debt refinancing exists to correct for such situations.
By consolidating a host of smaller, high-interest debts within one, relatively low-interest loan, a borrower can effectively reduce their monthly payments while potentially hastening the paydown process.
This measure, by default, creates a financial opportunity for the borrower. Money once set aside for debt repayment may now be put to work in the form of an investment. A person once paying $2000 per month towards their debts but whose consolidation efforts reduced that payment to $1550 now has, in theory, $450 per month available to invest as they see fit. The saved money can, in finance terms, effectively “work” for that person.
2. Assume No New Debts, Credit Card or Otherwise
This piece of advice may seem somewhat elementary, even perfunctory, but it is highly important. Refrain from taking on new debts while you are focused on eliminating those presently burdening you. This even includes new subscription services like HBO or Blue Apron. While these aren’t traditional debt vehicles, they are recurring charges that put a dent into your wallet and ability to pay off other debt.
Of course, consolidation loans aimed at yielding you more advantageous interest rates and lower monthly payments are another story.
Cancel your credit cards, leaving one for emergency use, and ignore all offers for new ones (these will inevitably materialize). Your priority is to become and remain debt-free, which requires your debts move in one direction—downward. Consolidate and refinance loans as necessary but assume no new ones while doing so.
3. Budget Wisely and Reduce Your Daily Expenditures
Generate a strict spending budget and adhere to it closely. Put another way, spend less than you take in each month. This may require bargain hunting, cutting back on various luxuries, taking fewer vacations, and spending more evenings in. Trust the arithmetic: more in, less out.
Also, save or invest what you don’t spend. Whether you choose to play things safely and store your excess money in a money market or trust it with a financial advisor, the important step is to ensure your money is in some way working for you. Mutual funds and IRA’s are both fantastic ways to safely grow your money every day. If you are going to the trouble of spending less, you may as well ensure the money you’re saving is earning you a return.
Financial Independence Is a Worthwhile Goal
Being free of sizable debt is an ideal way to live your life. By taking advantage of refinancing options and operating within a sensible budget, you can easily achieve as much financial dependence.
