Paying off debt can be a great feeling.
The burden is lifted and you have more control over your financial situation. If you’re like many, however, paying down debt hasn’t been an easy task due to high interest rates and the sheer size of what you owe. Many people find themselves in situations where they feel helpless. But following some tips from this article can show you a path towards financial health!
Start by making a budget. Write down your income on a piece of paper or spreadsheet. Then, calculate how much you spend, on average, every month. If you can, categorize all of your expenses in order of amount spent. Be sure to also rank your debts from highest to lowest interest rate!
Then, subtract your expenses from your income. The result is how much cash flow you have available to attack your debt.
But before you start chipping away at what you owe, devote your cash flow to building an emergency fund. Why? Because it will provide a cash reserve to pay for unexpected expenses that you might otherwise cover with more debt!
Then, focus all your financial resources on your highest interest loan. Make minimum payments on all your debts until that top priority debt is eliminated. Next, move on to the next debt. Rinse and repeat until you’re debt free.
Track your spending and cut back where possible. When you budget, you might find that you have almost no cash flow. If that’s the case, you’ll need to reduce your spending. Start by cutting back on categories like clothes shopping and dining out.
Above all, be consistent! Reducing debt is no easy task but it’s doable. Cutting back on your spending and consistently budgeting may not be easy in the short-term, but the sense of relief that comes with being debt free is well worth the effort.