Eliminate Debt – Plan for Your Future

Eliminate Debt – Plan for Your Future

Many people are in debt. Car loans, credit cards, and student loans are the three most common debts that linger in many family budgets. If you find yourself in this situation, you are not alone. Many individual households are currently living paycheck to paycheck with no end in sight. Something has to change as people continue to slip further in debt and their children watch and learn these bad behaviors.

Good spending habits are easy to explain, do not spend more money than you earn. This allows you to keep debt at bay and out of your life. Many people probably would not own a car if there were no such process as a car loan. Just because you can incrementally pay for an item along with the interest does not mean you can afford the item. You are essentially renting the item from the lender and you pay them for assuming the risk of loaning you money. This makes them rich while you continue to stay in debt.

Spending Habits

People with good spending habits do not borrow money, they save what they earn, then make decisions to write checks for things that fit into their budget. Think how much money you could save if you had no loans to repay to a lender, even including your mortgage. Once you achieve financial freedom, you can begin saving for retirement very quickly because the portion of your budget previously reserved for loan repayments can now go towards investment accounts, which helps you get ahead.

In this article, below are simple but effective plan that eliminates debt in a six-step approach that allows you to take over your spending habits and focus on debt elimination. If followed correctly, you should be able to eliminate the majority of your debt excluding your mortgage well.

Build a budget

This sounds easy but many people have not sat down and built a budget to explain where every dollar they make is spent. In fact, if you were to ask a few people what their total monthly expenses amount to, they would probably have to begin by writing it on paper. Every household needs to follow a strict budget that is transparent and enforced.

Building your budget achieves three main goals. First, it enables you to see where you are spending money, which makes it easy to make some sound financial decisions. Next, it allows you and your spouse, if you have one, to be on the same page so you understand each other’s spending habits. This is important, you and your partner must financially unite or none of the other steps will work.

Manage household expenses

Lastly, it tells you exactly how much money you have leaving your household. Part of putting together your budget also includes eliminating extra expenses or at least putting some on hold. One that many may find difficult is the retirement accounts contribution elimination. Once everything but your home loan is paid, you will continue to contribute to your retirement accounts. It may seem risky especially if you have only a small nest egg but overall stopping these contributions allows you to throw more money at your debt, which ends the debt faster so you can contribute more to retirement later.

Create a small starter savings fund that is only for emergencies such as the car breaking down or you missing a day of work because you are sick.

 Again, this fund is only for unplanned events and anything outside of this small fund will have to come from the monthly budget. Tell people that if any bills have gone to a collection agency, it is your responsibility to settle those debts. While calling these agencies, you should know exactly what the debt was prior to any late fees. Begin the conversation by asking them the best offer to settle the bill. They will probably drop to what you originally owed but that is not their best offer.

The debt snowball or sometimes the debt avalanche.

 You take all the debts, put them in order of lowest to highest total amount owed, and pay them off in that fashion. While doing this step, you pay only the minimums on the other higher debts and throw all additional money beyond your monthly budget at the smallest debt. This will work just fine however; you will continue to pay a very high interest credit card payment, which will cost you more money because your minimum payment is probably not covering the interest that is gaining on the principal. Remember; only attack the high interest items, typically credit cards and payday loans in this fashion, then continue the debt snowball method.

Finish building your emergency savings fund

 At this point in your journey, you have paid off everything but the house so you have much more available income to set aside for a rainy day. A single person has more risk because there is only one income to rely on, if the job goes away, then all of their income goes away too. Married people share the risks however, not all jobs are stable, and some people have commission-based jobs that do not provide steady income. Then there are people with children. If you believe you have a low risk factor then you can have an emergency fund of about 6 months of your household expenses. This is if you are single, your job is stable, maybe your mortgage is paid and you have mutual funds available if you need to liquidate additional money. Save what you need because at this point, if you have an emergency, you will have this fund and you should have retirement money through mutual funds.

Focus your money on your investments

Your investments, for this step include your children, your home and yourself but not necessarily in that order. You can prioritize the investments in any order you choose and reconstruct your budget with percentages. Your home is your largest tangible investment you will probably own. When throwing additional money at this loan it is important to focus these funds towards the principle. This is how to pay it off faster.

Continue funding your retirement accounts and enjoy life

Making it to this step is difficult but because you have done everything right, you deserve to enjoy the lifestyle you created. Some people need a jump-start when they begin the debt elimination journey. For this reason, it is better to adopt some if not all these additional ideas because in the end, they will get your debt eliminated much quicker.

Do you have a self-storage unit costing you monthly for stuff you literally forgot that you still own? Does your garage at your house have everything in it but your car? If you answered yes to these questions then you probably need to have a garage sale. People will pay you to haul away stuff that you do not need.

Beginning your journey to financial freedom can overwhelm most of us. You have to stare directly at debt even if it is two to three times your annual household income. Do not let it defeat you, attack the debt as if your financial future depends on it because it actually does. Eventually, it will be gone and at that point, you have won. You have stopped paying for your past and can begin saving for your future.

Best Personal Loan – 1st LG Credit 

Need urgent cash to settle for the multiple debtors? Apply for the debt consolidation loan from 1st LG Credit to reduce your burden. Furthermore, our advisor will customize the best loan package with most suitable for you. Drop by our office between Monday to Friday 10AM – 7PM, Saturday 10AM – 5PM, Sunday 7AM – 6PM.

Our office is located on Orchard road can reach by public transport. The address is 304 Orchard Road #02-29 Lucky Plaza Singapore 238863. Act now! Call us at +65 6299 6654. Lastly, you can surf www.moneylenderpro.com to get more information.

Review Date
Reviewed Item
Debt will become snowball, therefore we need to eliminate it asap.
Author Rating

No Comments

Post a Comment