5 Useful Tips That Can Help You Become Debt-Free!
In order for you to become debt free by the end of the year, the first thing that you will need to do is get a better understanding of what you are spending your money on. The main reason why people end up getting deep into debt is that they blindly use their credit card for all small daily purchases. While the average lunch or cup of coffee may not seem like a lot of money, these expenses can really add up over the course of the month. So you have a better idea of what you spend on a monthly basis, you should track every purchase that you make for that month. At the end of the month, you should add up the expenses to see how much you are spending on necessities and what you are spending on discretionary items.
After tracking your expenses for a month, the next thing that you should do is set up a personal budget. Your personal budget should include all items that you will need to spend money on each month, including rent, car payments, insurance, etc, and also include some reserves for some discretionary and entertainment spending. Not including a budget for any discretionary spending will not be reasonable over a long period of time. Another part of the budgeting process should include a reserve to pay down your existing debt. You should have a detailed plan of how much you want to pay down your debt each month and when it will be completely paid off.
Another tip that could help you pay off your debt within a year would be to negotiate rates on your products and services. While credit card companies may charge you a very high interest rate of 20% or more, you are not necessarily stuck with that high rate. By simply calling the creditor and requesting a rate reduction, you could end up seeing your interest rate reduced dramatically. This could save you hundreds of dollars per month in excess interest charges. If you are not able to get a reduced rate, you could save even more money each month by transferring your balance to a new credit card that provides a low promotional rate. Other service providers, such as cable companies or cell phone service providers may also reduce your rate if you attempt to negotiate with them.
While you can work hard to stay within your budget and reduce your personal expenses, another way to get out of debt would be to liquidate your personal items. Most people have plenty of items lying around their home that are either not necessary or are hardly ever used. While you will likely have to sell the items for much less than you paid for them, selling your items and using the sale proceeds to pay down your debt could improve the speed in which you are able to completely get out of debt. Good ways to sell your items would be to place them on eBay, hold a garage sale, sell them at a flea market, or even donate them and take advantage of the tax deduction.
Most importantly, when trying to pay off your debt quickly, it is extremely important that you continue to track your progress. You should continue to closely monitor where your money goes each month and what you are spending it on. Your tracking system should also track whether or not you are paying down your debt at the same rate as your initial projections. If you are staying on track, then you will likely stay motivated to keep up with the pace. If you are not, then you could start to find additional ways to speed up your debt repayment plan.
