Many people have been plagued at some point because of huge debts, financial emergencies, and other concerns that have disrupted personal aspirations.
However, the practices listed below can help us live a debt free living.
Set Precise Life Objectives
‘Precise’ is the essential word here. You must honestly assess what financial independence entails. A broad desire for it is too nebulous to be defined as a goal. Instead, you should set out how much money you should have in your bank account, your ideal lifestyle, and when you aim to reach it.
Remember that the more precise and crisp your goals are, the more likely they will be met and eventually you will be living debt free life. You may then count on your current age and create financial milestones at regular intervals in order to live a debt free living. As a bonus, keep these objectives in mind at all times.
Stop spending haphazardly and start conscious budgeting.
The most effective way for a debt free living is creating a systematic money management plan. Consider it a type of foundation without which none of the practices discussed in this blog would help.
The money that comes in with each paycheck that does not have an explicit purpose will magically vanish before you even know it. You’ll be perplexed about how you suddenly have more months than money during the first week of the new month.There are very few people who get enthusiastic about creating a budget.
However, consider it this way: for debt free living, the budget is not the end objective, but it is actually a means for living debt free life. Do you want to acquire a home, have a family, buy your dream automobile, or go on a vacation to the Maldives?
If you answered yes, you should work on your budget. When it comes to this, there just isn’t a shortcut. Instead, use your unique goals as fuel.
Experiment using the 50/30/20 Rule.
The goal for living debt free life is to spend 50% of your income on necessities, 30% on desires, and the remaining 20% on debt reduction and savings.
Keep in mind that, for a debt free living most people consider these percentages the absolute most you should spend. This means that spending less than these amounts might leave you with even more money for other ambitions.
Self-discipline is essential, as it is for all other habits, to truly work towards attaining your desire for financial freedom.
Pay Off Your Debts Completely
This does not mean that you should use all of your earnings to pay off your debts. You may approach it in two ways, depending on your preferences.
Are you a “Snowball” or an “Avalanche” person?
Using the avalanche technique, put your debts with the highest interest rates at the top and pay those first while making periodic payments on the others.
The snowball technique is less concerned with arithmetic and more concerned with motivation. Firstly, make a list of your debts, from least to greatest. Pay off the smallest debt initially, then work your way up with recurring payments.
When the first loan is paid off, you add the payments you were making on it to the minimum installments you were making on the next debt. That second loan is now in your sights, and it is being eliminated at a quicker rate than the first.
Making a list of particular payment dates can help you make this work for a debt free living.
Live within Your Means
You must be totally honest with yourself and acknowledge that cutting back, for the time being, is necessary to achieve the objective of debt free living.
The key to mastering a ‘living below your means’ lifestyle is cultivating a mindset that supports this. Meat and beans provide protein to the body; the choice is yours. Do you need that TV subscription to see the latest movies?
Making minor modifications by discriminating between what you need and what you desire is a financially beneficial habit to cultivate for living debt free life.
Living life to the fullest with less isn’t that difficult. Just think of the larger picture (your specific goals, such as that dream trip) as personal motivation during the bad days.
Make Your Savings Automatic
It’s always smart to set up an automated withdrawal for an emergency fund that may be used for unanticipated needs and an automatic donation to a Chit Fund or something similar.
Ideally, the dedicated money should be withdrawn on the same day you receive your salary, so it does not come into contact with your hands, avoiding the temptation of each payday.
Try adopting these routines and evaluating your progress after a year to determine whether you’re making progress and changing as needed to meet your specific financial objectives.
Remember to always do your homework before making any major financial decisions.
For example, if you want to get a loan ask yourself if it is an immediate need, or can be bought at a later date. If it can be bought later, then you can save for it before purchase, rather than taking a loan for it. Also, make it a practice not to ignore the dreaded collection calls, which have seen some go as far as forcing victims to alter their phone numbers.
Ignoring collection calls will not make the debt disappear and may worsen the issue. It’s important to recognize the debt and explain why you can’t pay it. This is the key to a debt free living.
The creditor may be able to assist you with the interest rate and due payment dates.
Finding out if your bank offers payment breaks can save you a lot of trouble and allow you some breathing room while you strive toward payback.
Finally, keep in mind that all of the preceding is guided by five key principles: consistency, timeliness, justification (justify every spending), documentation, and responsibility. All the best for creating a successful and rewarding financial management plan for a debt free living!
How could debt negatively impact your life?
Being in debt makes it difficult for you to qualify for other loans; the obvious reason is that most lenders require that your debt to income ratio be around 43% or less, including future mortgage payments.
Additionally, you may be rejected for having too much debt.
Why is avoiding debt important to living debt free lifestyle?
Being in debt can be stressful as it directly affects your relationships at home and possibly affects your work; thus, it’s very important living debt free lifestyle.
What is considered good debt?
Good debt allows you to manage your finances more effectively, handle emergencies, and leverage your wealth.
What are some of the financial benefits of living a debt-free life?
There are some amazing benefits of living a debt-free life, more of your income is available to you, less financial risk, and improved credit score.
What are some of the mental benefits of living a simple debt free life?
There are several benefits of living a simple, debt-free life: less stress, improved mental & physical health, and higher self-esteem. Last but not least, increased productivity.