Debt is one of those things that most people can’t avoid, but how do you live debt-free? How do you pay off your student loans or how do you get rid of your credit card debts?
First of all, how are you going to take the decision of living debt free. This will be an important step because if you think about it carefully, it could mean a big change in your life. You have to realize that being in debt means that there’s no freedom for you considering money matters. Before you start living a debt-free lifestyle, you must first pay off all your debt and then avoid getting into further debt.
First: Start by paying off outstanding debt
The first step to living a debt-free life is to start paying any debt you have, then the next step would be to avoid getting into another one again.
Here are the steps to follow to pay back your debt:
- Firstly, go through your income and expenses to see how much you are spending each month.
- Secondly, cut down all expenses that are not necessary such as cable television, home phone line, etc.
- Thirdly, use less of your credit card or if possible stop using it completely while paying back the debt. If you do use the credit card make sure to only buy things for emergencies or necessities for example groceries when you run out of food.
- Fourthly, make a list of how much you owe in total and how long it will take to pay them off (if there is no interest). Also, include how much you need to put aside every month in order to pay them off at this rate; look how quickly you can pay off your debt, how much you need to pay asap, and how long it will take to pay them off entirely.
- Finally, prioritize how you want to go about paying back your debt. It might be a good idea to start with the debts that have higher interest rates first and move on from there; this way you will avoid putting yourself into serious financial problems.
You can learn more here on how to be debt-free on low income.
Secondly: Avoid getting into debt
Once your debt is paid, the next thing to do to live a debt-free lifestyle is to avoid getting into further debt. Here are some tips on how to avoid getting into debt:
- Buy what you can afford. Don’t ever buy something just because other people have it or would want it. When purchasing anything ask yourself how much can I afford to pay for it?
- Don’t depend on credit cards. Credit cards are a big problem in themselves because most people often use them not realizing how much the interest rates will pile up at the end of the month. Plus, how many people don’t pay their credit card bills on time? And how many times have you heard “I’ll pay this one later?” Many people get into debt just because they have used credit cards when they didn’t have enough money to do so, and then they spend months or even years getting out of that situation.
- Make a budget plan. Having a well-balanced budget is important when it comes to living without debt, you need to know how you spend your money, how much do you spend on transportation, how much do you spend on food, how much do you spend on rent. All these things are important to know so that you can manage your finances properly.
- Save some money! This should be obvious but surprisingly many people don’t actually save any money. How will you live debt-free if all of your income goes out as soon as it’s earned? Having a savings account is very important for many reasons; the first one being that having money saved up gives you time to think about what to invest in or how to use that saved up cash.
- Be patient and persistent, debt is like a snowball rolling down the hill; it gathers more snow as it goes along. You have to be persistent and patient, don’t give up easily when something doesn’t go how you wanted it to be, keep trying until you get the results that you want.
Well, that is how! I’ve given you 5 tips on how to avoid getting into debt and how to live a debt free life. If one does not work for you try another tip or two, but persistence is key. It’s always good to know how much money do we spend monthly or even weekly so that we can manage our finances correctly.
Is it good to live debt-free?
Yes, it is good to live debt free. Living debt free means you don’t owe anybody money and do not have any transactions with any financial institution such as banks or credit card companies. By living this way, you will be able to save lots of money because you won’t need to pay any interest rates on loans or pay obscene amount of annual fees just for having the privilege of using a credit card. Other benefits include having extra money in your pocket and avoiding sleepless nights worrying about bills that always seem to sneak up when least expected.
Many people who decide to take control of their finances by learning how to live debt-free achieve financial milestones such as saving enough money to buy a house and graduating from college without debt.
Living a life free of debt is not easy because most people who live this way have had to learn how to live without credit cards and expensive unneeded material items that we often equate with success or happiness. However, if you are willing to take the plunge and begin cutting up your credit cards and setting some goals such as saving money towards buying your first car in cash instead of leasing, living debt-free will soon become an integral part of your life.
What’s more important: having many material possessions or having financial freedom?
At what age should you be debt-free?
There is no correct answer to this question. It really depends on your financial situation and what you prioritize in life. If you want to retire soon, then the sooner the better.
If you are single and ready for some fun, reduce your debt so that when an opportunity presents itself; you can live it up without worrying about paying back loans!
He lives in Plateau State, Nigeria with his wife, Joyce, and daughter, Anael.
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