Here are 7 insightful steps to becoming debt free and staying there. Get rid of all that debt once and for all and start 2017 off right!
Published: Sunday, November 20th 2016
These days, most of us live with a certain amount of debt. Whether it be when buying a car or your dream home, having credit and debt has become commonplace.Of course, there are certain things that you can pay in cash such as appliances or certain technologies, provided that you diligently saved and budgeted for the expense.So while it's clear to see that, at some point in our lives, we will have monthly payments to pay back, learning how to manage that debt comfortably will ensure you never fall down that rabbit hole.
Follow These 7 Debt Busting Steps To Help Get Rid Of Debt
1. Use Your Credit Report To List All Active Loans, Credit, and Other Account Information
A credit report is made by credit bureaus to assess your loan paying history and the status of your credit accounts. Since lenders use these reports to make lending decisions, always check the health of your credit report.List all active loans and credit to know exactly which payments you need to prioritise.
2. Write Down Your Monthly Income
Start by detailing all income that is coming in after tax, i.e.: freelance income, rental income, partner's income, etc.
3. List All Your Monthly Expenses
Next, detail all your monthly expenses, such as mortgage, food, electricity, water, lights, children's school fees, etc.
4. Calculate Your Monthly Budget
Minus your monthly expenses from your monthly income to determine what is left over and what capital you have to spend on other expenses.
5. Save 10% Of Your Income Each Month
Try and reduce your monthly budget so you are able to save at least 10% of your income each month. This involves deciding between the must-haves (necessary expenses) and the nice-to-haves (unnecessary expenses).
Reduce Nice-to-haves: Eat out less often, adjust your satellite viewing (or cut it out altogether) and reduce all luxury expenses.
Reduce Must-haves: Carpool to save on petrol, conserve water by using bath water in the garden, and turn off lights when you leave the room.
6. Use These Savings To Pay Off Your Debts
With this newly freed up cash, use the savings to pay off your debts, starting with the highest interest rate debts. This is because higher the interest rate, the more expensive it ends up being. Credit card and store-card debts are likely to be the most expensive.Tip: Pay more than the minimum amount owed each month and the interest will automatically decrease.
7. Lastly, Create a Payment Calendar And Set Goals
This calendar will include the due dates of each debt payment, as well as the amount owed. Stick to this diligently.You can also set goals for debts and celebrate (within reason) when you reach a major debt-busting milestone.