5 Essential Tips on How to Pay Off Debt for Financial Freedom
Understanding Your Debt
We know how tough it is to climb out of the hole of debt. The matter of owing money to a creditor, no matter the amount, can take up a large amount of mental space that wears you down. It is very hard to figure out how to pay off debt. These days, financial problems can seem like a downward spiral, leading to more issues than it seems like you have the time or energy to solve.
However, we’re here to offer you support during this stressful time, and we’re happy to tell you that the future is not a hopeless one. Thankfully, we have a guide of five steps that you can take that can lead you toward how to pay off debt. If you follow these steps, we promise that you can start this process and begin the path toward an easier financial life.
Step 1: Assess Your Debt Situation
When it comes to debt, you’re probably dealing with a lot of information flying at you at once. You probably have a load of mail, email, envelopes and all kinds of stuff piling up. But it’s not impossible. Take some time, gather up the readable material you have, and make sure you have all the important files on hand. You may not know that debt can come at you from a variety of different areas:
● Mortgage loans
● Car loans
● Credit cards
● Medical debt
● Income taxes
● Student loans
● Personal loans
First, make sure that you aren’t getting into more debt than you have already. Stop any additional spending that you’re doing at the moment that you don’t actually need, and especially any credit card spending. This will help your current situation.
Often the more debt someone has, the more they will spend in order to try to get away from it. We highly advise against this, as credit is quite different from cash. (Cash is the money you have to your name, while credit is not.) You also may have your credit card information saved in online stores, subscription services, and other similar locations. Make sure to delete these.
Overall, you must be honest about the fact that you’re in debt first. To solve any issue, you need to address it first head-on, so that you can see just what you’re dealing with. Start clearing unnecessary spending out of your day-to-day life, and you’ll achieve the first step towards financial recovery.
Step 2: Prioritize Your Debts
This may be a stressful step, but it’s a step that you’re making the right direction. Take out your calculator or app, gather up those envelopes and emails, and start adding up the total amount of debt you have. A Springfield bankruptcy attorney encourages that you do this before filing for bankruptcy or taking any legal measures.
Once you have the precise number, then you’ll know just how much exactly you need to look at, so that you can rank your debts from smallest to largest based on the amount and type of debt, which we talked about before. Debts can range in quantity, so it’s important to know just exactly how much you owe and to who.
This will also allow you to start planning ahead in paying off the smaller debts first if you can, which could alleviate some stress and allow you to take stock of your larger debts. In addition, adding up your total debt amount will also make it easier to speak to an expert so that they can help you better (this step we’ll talk about a little later).
Step 3: Create a Budget
Maybe you were living on a budget before. Or maybe things just got difficult and you lost track of your spending. We’ve all been there. But now, whether you like it or not, it’s time to start budgeting yourself a little bit better. The sooner you start, the sooner you’ll be on a path towards easier financial living. There are multiple programs or apps that you can use that help you start on a path towards a smarter budget:
● Excel
● PocketGuard
● HoneyDue
● Simplifi
● Clarity Money
You can use an Excel spreadsheet on your computer to compile your expenses. It’s a program that’s been around for ages, and its format is perfect for arranging budgets. There are also other, “smarter” options. These days, we use apps for everything: entertainment, communication, and yes, even budgeting.
There’s a free app called PocketGuard that connects your checking and savings accounts, and also detects recurring bills and income. This app also allows you to create custom categories and set limits for budgets as well.
There’s also an app called Honeydue, which is designed for partners to see their shared bank accounts, as well as set custom categories and monthly spending limits. Simplifi connects to your bank account and is able to track your upcoming bills. Clarity Money, another free budget app, is unique in that it offers up suggestions in terms of subscriptions to cancel (remember when we suggested that in Step One?)
The days of having to call or drive to banks in order to make transactions are over–if you have a smartphone and need to start budgeting yourself, make use of an app to help start you on an upward and responsible path.
Step 4: Consider Debt Consolidation
We talked before about adding up your debts so that you can take a look at what you owe and possibly start paying off your smaller ones first. Even if it’s a debt as small as a few hundred dollars, starting off with these little payments can provide a responsible foundation that you can build on.
We’ve also discussed starting a new budget. The focus is on creating a core strategy for a long-term plan. On average, it takes people two to three months to start getting on a solid budget. The sooner you start, the easier it will be.
Some parts of your new plan–and some of which we’ve mentioned before, might include:
● Reducing unnecessary spending
● Selling old gifts
● Less takeout
● Deleting credit information from sites/subscriptions
All of these are smaller steps that lead you to a bigger picture: putting a new plan in place. Reducing unnecessary spending, making small debt payments if you can, starting on a new initial budget…all of these are stepping stones that you can build on along your way to financial freedom. And that’s just it: small changes that you can take that all add up to a better future for yourself, little by little.
Think of other changes you can make that might be able to help with regard to debt payment. Selling gifts you got years ago from a friend or relative that you no longer want or use might be one. Reducing the amount of takeout you get each week by one or two might be another, which adds up to weekly food savings. All of these are tiny steps that, when taken little by little, can lead to an easier financial journey toward debt relief.
Step 5: Stay Committed to Your Plan
This is the most important step. We’ve talked about ways in which you can help the situation yourself. Responsible budgeting, cutting back on unnecessary spending, and making any payments to smaller debts that you can are all ways that you can start fixing your debt situation on day one. These are ways you can adjust to the situation on your own.
However, if it comes down to it, don’t be scared to reach out for help in case you are truly overwhelmed by the amount of debt you are facing. Sometimes you may need an expert to help you assess your situation and decide the best course of action to take.
If you’re being threatened with foreclosure, or have creditors constantly calling you and harassing you about bills, then you may be in a situation in which a legal practice should step in. Fortunately, there are many legal experts with the skills and knowledge that are able to aid you and give you the help you need in order to start your journey towards financial independence.
With planning, confidence, and a winning mindset, we’re confident that this five-step guide will help you start fixing your debt situation. Yesterday was a time of overspending and poor planning. Today is the day you start achieving freedom with your money and build a path towards a new tomorrow free from debt. And we know that you can do it.
Today is the day you start achieving freedom with your money and build a path towards a new tomorrow free from debt. And we know that you can do it.
