Debt is equal to stress. It could be hard to escape from that if you’re enchained. Well, most people if not all, who are in deep trouble with their finances are dreaming of getting out from it. That someday they will be able to experience a real good night sleep and live a life free of debt.
Being in debt is somehow part of life. Yet, if you won’t have a concrete plan on how to pay off these dues, that makes it incorrect and not normal.
Our intention to write this article is to help. Most especially to people who have the difficulties in settling their outstanding balances. And of course to let everyone learn on how we can enjoy a life that is financially free.
Important tips on how to become debt free and live financial freedom
STEP#1: Identify your source of income
It is imperative that you know how much you are earning; daily, weekly, or monthly. We mean about real income this is your net money receive. This does not include your gross. But rather, direct your focus on your balance after the required government deduction. Such as taxes, insurance, and etc.
If your income is from your business or services. The real profit is after you less your capital, pay all your expenses. Like the rental, overhead, electric bills and others.
STEP#2: Make an account how much your outstanding debt.
It is recommendable that you make a list all your payable. Rank those bills from highest to lowest. Those which incurred interest like bank loans and mortgage are of highest importance. And then, write down all your basic monthly expenses. This includes your food, clothing, travel, and others.
STEP#3: Create an escape plan.
After you have identified your net income and made a priority list of all your monthly expenses. Now is the time to distribute properly your income.
Here is a good suggestion, sixty percent of your net income will be set aside for your monthly basic needs. Take note, basic needs, your wants is not included in your budget. You need to live within your budget and do not dare to spend beyond 60% of your income.
Forty percent of your net income will be allocated to pay all your debts. You need to pay first all financial obligation that incurs high interest. Because that will cause you more trouble. Pay one at a time, until you get rid all your payable.
If there is a need to cut some of your regular expenses like leisure, vacation, then cut those. It won’t make you die if you cannot achieve that leisure. This is your first step in changing your spending habit.
STEP#4: Refrain from making more debt.
You need to discipline yourself from creating extra debt. Refrain from using your credit card. Or as much as possible deactivate your credit card. To refrain from the temptation which may result in overspending.
You need to think over and over again on the possible circumstances that will lure you to spend more. Do this until you pay all your existing debt.
STEP#5: Maintain your lifestyle
After you escape from your debt, we like to suggest that you will maintain your lifestyle. Hopefully, during this time you already adjusted the spending habit.
Place the 40 % of your income allocated for your payable in your savings account. It is to secure yours for future investment and needs.
STEP#6: Start investing
There is a wise quote says do not put your money on a single basket. Meaning, do not rely only on a single source of income. Start investing or creating another source of income.
The initial step is to research and find business or investment that is suitable for you. Choose a conservative way of business do not try to a get quick rich scheme or high-risk investment.
It needs a single step and a scientific way to become debt free and live financial freedom. Follow the above few steps religiously and this will guarantee your success. Discipline is the key to success.