Dealing with Debt in Seven Steps Toward Financial Freedom

Despite the fact that you are obligated to repay all your debts, it’s not necessary to have them jeopardize your future financially. But before you embark on a quest to regain your financial freedom, you’ll need a solid plan to help you achieve the goal.

Fortunately, climbing out of debt is not hard and you only need to set definite goals guided by realistic calculations. Once you are determined to follow the set course, you’ll be out of debt even before you know it. If you are ready to begin, here are a few things you’ll need to focus on.

Mental preparation to climb out of debt. Before you think about creating a strategy, you need to be mentally prepared to break free from debt. It’s important to adjust your mindset to the way you’ve been viewing debt. Basically, the mental adjustment boils down to repositioning your view point for debt and finances in general. 

Debt has a way of making you feel incompetent and sometimes you can have recurrent thoughts of helplessness. When you are facing debt, it’s quite normal for most people to think they’ll never climb out of debt. Others will see it as an obstacle they can never master and some will simply brush it away since victory seems to be so far. 

While it is alright to experience those things, it’s important to stay put and stand up against emotions that can hinder financial freedom. Emotions must not be allowed to compromise your capacity to get out of debt.  Irrespective of your financial situation, it’s possible to create a financial plan that will get you out of the debt.

At all times, you must realize that you are responsible for your debt and you must take charge to change the situation. Basically, you’ll need to embark on adjusting your money behaviors and this requires you to change how you’ve been viewing money.

Assess all your debts. After you’ve developed a positive mindset toward finances, it’s very easy to come to terms with your debts. Today, most people who are in debt don’t understand the crucial aspects of the loans and how they work. You need to know your lender well as well as all the particulars of the loans taken from –a trusted quick lending source that you’ve taken.

Start by checking your credit report so that you can establish how many debts you have and their specific amounts. When you’ve checked how many debts you have, it’s necessary to start doing the following.

  • Know the current outstanding balance for each of your loans
  • Find out the specific interest rate for your loans
  • Get to know the minimum amount you are expected to pay each month

Unlike in the past, today it’s easy to get information online as you can access your account with creditors anytime. If you are not satisfied by the information on the online portals, you can call your creditor and they’ll gladly give you additional details of your loan. 

Cut down your monthly expenses. After establishing the amount of money you owe, it’s necessary to tackle the problem from the root cause. To change all the habits that could have led you to debt means you’ll need to adjust all your expenses. To start with, create a budget that will guide every category of your expenses. Then, track your expenses to know your previous spending habits and make the necessary adjustments.

Find ways to get some extra cash. If you can only afford to pay the minimum payments it means it will take you longer to clear the debt. If you want to pay off the debt quickly, you need to make extra payments towards your loans. To get some extra money, you can try finding a side job and dedicate the earnings to debt management. It’s easy to get hired on online freelancing platforms and you could also start selling some stuff on eBay or Etsy. Generally, you need to get more money to clear the debts quickly.

Prioritizing your debts. Different lenders have different lending terms and it’s likely that your current loans differ significantly.  Start by looking at all the loans and rank them from the most expensive to the least expensive. To climb out of debt quickly, you’ll need to pay off the debts with high-interest rates faster. This can be done by making some extra payments each month. 

Consolidate your debt. If your debts are too many and you feel overwhelmed by the number, you can combine them into a single loan and can take help of auto to reduce some interest. Debt consolidation can be a good way of managing multiple loans since the lender pays all your outstanding debts and you are left with a single debt to work on. Sometimes, it can be cheaper than some of your current debts but you need to look for a deal that offers better interest rates.

Be diligent in your payments. Now that you have committed yourself toward clearing all the debts, it’s very important to make regular payments. This will not only ensure you clear the debt as planned but will also help you avoid unnecessary penalties and fees. Getting out of debt is a long-term process and being consistent with repayment plans draws you closer to the finish line.

Conclusion? Debt can be very stressful and sometimes it makes you feel helpless. But if you are committed to following a well-thought plan, you can break free eventually. However, it is also important to stay safe once you’ve cleared the debts and the most appropriate way is by building an emergency fund. 

Photo by Ienetstan | Shutterstock

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