5 Ways to Become Debt Free

By
Eric M.
on
November 13, 2018

Learn 5 ways you can become debt-free and free up your finances.

Consumer debt is a bad thing. Most everyone knows that. Sure, it will be harder to get out of debt than it was to get into (I can promise you that). But, with these 5 tips to become debt free, you can and will get out of debt if you truly adhere to them.

1) Take Inventory and Track Expenses

First and foremost, in order to get out of debt, you must first understand why you are in debt. Too many people get into the habit of just "putting it on the card". And before they know it, they have $10,000 in credit card debt. This mindset of paying it back later causes debt, and sometimes a lot of it.Track all of your income. And then look at your expenses. Where are you spending most of your excess money? Are you spending it on essentials or wants? 

More than likely, there are a few areas where you can cut back. Allocate money for living expenses, cars, insurance, food, clothes, phones, and a little bit of entertainment. How much is left over? Get to know your money inside and out. If you don't know your expenses, then debt is a difficult thing to get rid of.

2) Decide Your Standard of Living

Once you realize that it's time to make a change in your life, you must look at your standard of living. The reason for your debt is that your standard of living has exceeded your ability to maintain it. You must start to ask yourself questions about how you live. What kind of car do you have? Could you survive with a cheaper one? Is your mortgage too much? Do you need to refinance or find a different place to live? 

Often times people will realize that they have exceeded their limits. If this is the case, look for a cheaper place to live or find a used car half the cost of your current vehicle. There are many ways to save money. You must first step back and take a look at your financial situation. Decide if you are able to downgrade your standard of living in order to break free of debt.

3) Spend Less Than You Make

Spending less than we make goes hand in hand with the "pay it back later" attitude. Let's do some quick math. Variable A is your income, and B is your expenses. If you subtract B from A, then C is your left over money. If C is a negative number, then you are spending more than you make. If C is a positive number, then you have money left over and that is a great thing. 

Spending less than we make is such a simple concept but sometimes so difficult to implement. We have to sacrifice to get out of debt.

4) Stop Using Credit Cards

Credit cards are typically the main reason for large amounts of debt (aside from student loans and car loans). Using a credit card allows the average person to buy something and make those payments later, or retroactively. This is fine if you pay it off each and every month, but if you don't then interest begins to accrue. 

When interest comes into play, things take a turn for the worse. Interest rates are usually ridiculously high and add hundreds or thousands of dollars to debt over the years. If you have an issue with credit cards, then get rid of them. Cut them up, throw them away,  burn them. 

Keep one for emergencies if you would like, but put it somewhere not easily accessible. It is far too easy to abuse credit cards and get caught up in debt. Don't let credit cards hold up back from financial freedom any longer.

5) Involve Others

One of the most powerful tools in fighting debt is to involve others. If you are married, then involve your spouse. There is so much power in numbers. 

Tell your family and close friends about your new spending habits and how you are trying to become financially sound. They will help hold you accountable. Share your progress with others and you will be surprised at how easy it will be to continue your journey to being debt free.

Becoming debt free is possible with hard work and determination. Create a starting point and being to work through these tips. Remember that even a little progress is better than nothing. Make a plan and stick to it. Continue to work at it until one day you are completely debt free. Then the sky is the limit.