Most financially responsible adults will experience some debt in their lifetime. Many purchases or pursuits require a large sum of money most do not have in cash or savings.
While it is ideal that you stay away from debt altogether, for the average person, this is not possible. Therefore, everyone should know how to deal with debt and get rid of it as quickly as possible. Here are some ways to get out of debt faster and enjoy financial freedom.
The Method of “Debt Snowball”
One of the fundamental aspects of controlling your money and personal finances is having no debts. And, if this is not possible, you must begin to finish them as soon as possible.
It is not a miraculous method. It is simply about organizing finances and creating and executing a plan. With dedication, you will be getting financial lung and reducing your loans.
Dave Ramsey, the author of “The Total Money Makeover” and other financial self-help books, speaks a lot about debt. He is an expert on debt relief because he experienced going from a billionaire to bankruptcy.
Here are seven steps Dave Ramsey recommends to help get you to financial freedom as quickly as possible:
- Save $1,000 fast to start your emergency “mattress.”
- Remove your debts with the “Snowball” Method, excluding the mortgage.
- Increase your emergency “mattress” to between 3 and 6 months of your expenses.
- Invest 15% of your income.
- Save for your children’s education.
- Pay off your home mortgage quickly.
- Build your wealth and give generously.
These methods are effective. However, it would be best if you kept in mind that you must first stop digging the financial hole you are in before you can rid yourself of the debt when it comes to debt. If you are still creating or expanding your debt, no amount of financial preparation will lead to a debt-free life.
You should also work at paying off debts well before they are due. While making on-time payments is commendable, taking the maximum time allotted to pay the debt back will be far more costly and prolong your time in debt.
Here are seven steps you can take to get on track and out of debt quickly:
- Commit yourself to pursuing a debt-free lifestyle and do whatever it takes, no matter how difficult.
- Work to increase your minimum payments by at least 5 to 10%, if not more, to pay off debts sooner.
- Collect information on all your loans and list ordering them from lowest to highest maturity.
- Set aside the extra or accelerator amount to cancel early, month by month, until you finish the debt that beats you in the first place.
- When you finish paying off the first debt on your list, add your payments, including the accelerator amount, to your next debt.
- Repeat the process until you get rid of your debts completely
- Once you have paid off all your debt using this method, continue to pay the amount to a savings account since you will be accustomed to paying the amount towards your debt.
Conclusion
Most people who experience debt can handle it decently, but many others lose control of their debt and get into further debt, trying to dig out of the hole. You must stay out of debt as much as possible or pay it down quickly when you have no choice but to go into debt.
Generally, debt will be a part of most people’s financial life. Therefore, everyone with debt should understand how to handle it so as not to let it overtake their life. Once debt gets out of hand, it can cause stress and financial strain for years.
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