If asked, some people would say that living a debt-free life is close to impossible. But, if you aspire to live with zero debts, do not get discouraged! Living a life free from debt requires a few tricks here and there, but it is not entirely impossible!
For most of us, debts seem to haunt us everywhere we go. We just don’t seem to figure out a way to escape them. Well, it is not every day that our pockets overflow, so seeking financial aid once is a while is totally OKAY!
Debts come in many forms and we are all susceptible to one or more of these debts. They include but are not limited to:
- Mortgage debt
- Credit card debt
- Car Loan
- Medical Loan
- Student Loan
- Personal Loan
After looking at the above types of debts and realizing that you have one, several or even all of them, you might be wondering, “what is she trying to tell me?” I am not suggesting that any of the tips I am about to give are easy, or a get-out-of-debt overnight scheme.
A staggering number of people are enslaved to mortgage loans and student loans in particular. So you are not alone! However, you are in a good place because you will get tips that will help you climb your way out of debt.
I was able to clear my student loans by laying down some ground rules and following them thoroughly. This practice has enabled me to stay debt-free several years after paying off all my debts. So, you are the determinant of the results that you get.
I recommend following these tips to the latter and you will notice a change in your financial life!
Tried and Tested Tips to Live Debt-Free
- Come up with a plan to clear your existing debts
This should be obvious. You cannot live a debt-free life if you have existing debts.
I know of people who 80% of their income goes to clearing their debts. Insane, right? But smart people would let the remaining 20% become the game changer. However, since there is no way to escape these debts, we can only get rid of them by paying them.
Paying your debts can be frustrating and confusing if you do not have the right plan. Let me help you come with a general plan (you can customize it accordingly).
- Start a side hustle to boost your total income – This will help you increase your disposable income and will save your finances from overstretching.
- Make a list of your debts from smallest to largest regardless of their interest rates – This will give you an idea of what you are working with and will ensure that no debt will be left unattended.
- Make a budget – This will help you focus your money on what matters. The extra money that is left after all the expenses are included can be put towards clearing your debt. A budget is important because it will help you take care of your everyday needs while you clear your debts on the other side.
- Attack your small debts first! – Depending on how small is small to you; you can clear these debts in a day, a week, a month or even months. Let these small debts get out of the way so that you can make a solid plan to conquer the large ones.
- Come up with a smart plan to clear the huge debts – You can choose to let all your income from the side hustle go into paying off your debts plus a small percentage of your main income (say 20-30%). It can also be the other way round depending on which venture makes you the most amount of money. Continue with this plan until all your debts are clear. It could take months, it could take years. Be patient, the plan will do everything for you!
- Cut up your credit cards!
You will never get out of debt if you do not STOP making debt a way of life. By all means, shred them! Get rid of them!
Credit cards block your way towards financial freedom. So, if indeed you want to live a debt-free life, then credit cards should never be a part of you.
- Change your attitude towards money
Even after you have managed to clear your debts, you will not be able to stay debt-free if you do not instill in yourself the correct financial discipline.
Lack of financial discipline could lead you back to debt, and this could be your cycle all over again (scary, right?).
Have a different attitude towards money and spending. Do not spend money as if you will always have it, rather treat money as something that comes and goes. Secure your life for the days that your pockets will be straining.
- Live according to your income
Write all your expenses: food, housing, water, health care and other miscellaneous things. Look at your rent in particular. I say this because most people are not financially smart when it comes to their rent money. This is one common mistake that young people do.
Your rent should only take up 25% or less of your total income. If it exceeds this, then you are doing something that can be considered not-very-smart. Try getting your rent money within this range and see how much more you could be saving every month! Follow this link to check out other financial mistakes that young people are doing.
- Always have a budget and stick to it
This is as straight-forward as it sounds. Although sticking to a budget is challenging, it is crucial to always have one. Put only the necessities in there and avoid what is non-essential. This will save you a ton of money every month so that you are even left with extra money to cover any miscellaneous spending that may arise.
- Save! Save! Save!
Honestly, I cannot overemphasis this enough. Saving is essential for living a debt-free life. It doesn’t have to be huge sums of money at once. It is the little that you have that eventually becomes a lot.
You can also get other tips for better money management.
I wish the best as you propel towards financial independence!