5 Ways to be Debt Free Faster
5 Ways To Be Debt-Free Faster
By Kimberly J. Howard
The most vulnerable area of your finances is the debt you owe to creditors. Unfortunately, until you can get out of it, your chances of having a healthy financial future are slim to none.
Clearing off all your debt cannot be done overnight, even if you enroll in a debt management plan. You may have even accumulated huge interest and late fine penalties over time. Thus, proper planning – with a bit of patience – is required to achieve financial freedom.
The below tips can help you get closer to becoming debt-free – fast:
1. Checking the debt to income ratio is the first step of understanding your financial status. Knowing the ratio can give you an idea about how much time it could take to clear off your debt. If the amount of debt is much greater than your income, naturally it would take longer to clear it off. However, it depends on how keen you are to get debt-free and the level of compromise you can afford to give on your expenses. Most banks and financial professionals agree you should keep your debt-to-income ratio at less than 36 percent of your gross income.
2. Next, scrutinize the inflow and outflow of your money. There are numerous pockets from where money could flow in or out. You need to locate those areas and try to restrain the outflow of money. There shouldn’t be any matter of self-complacency regarding the monetary transaction that your household is experiencing throughout the month. Though mortgage rates are at a historical low, it may not make sense to take on a mortgage. You’ll need to determine if you can make monthly mortgage payments, plus insurance, real estate taxes and home repairs.
3. Cutting expenses on things like groceries and utilities can be difficult. But, if you take up a Women, Infants and Children Program, buy coupons online and make bulk purchases while food items are on sale, you can buckle down a big part of your monthly grocery bill. The more money you can cut back on your expenses, the more money you free up to pay off debt.
4. By paying your monthly insurance premium, you can rest assured about any unseen emergency crisis. So, be careful about paying the premiums on time so that the policy doesn’t lapse.
5. Enrolling in a debt settlement program may reduce your total amount of debt, and you may get the benefit of paying less than you owe. But this may also bring tax consequences. So, you should consult a financial advisor before enrolling in this type of program.
Kimberly J. Howard, CFP®, CRPC® is a Certified Financial Planner and the owner of KJH Financial Services, a Fee-Only practice located in Needham, MA. Find her at www.kjhfinancialservices.com.
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