Choose to Be Debt Free
Many people do not know what it is like to be debt-free. Many young adults start out their independence by attending college and taking out student loans to finance their education. They may, additionally, take advantage of the numerous credit cards offered to college students and may graduates with thousands of dollars in credit card debt. Once they graduate, they move onto car loans and then mortgages, never stopping to think about becoming debt-free. Payments are just a way of life.
As of Dec. 31, 2020, consumer debt in the United States was at $14.56 trillion, with Americans carrying an average personal debt of $140,146 as noted in the 2019 Survey of Consumer Finances.
Think About What You Could Do Without Debt Payments
Consider the amount that you pay each month in consumer debt and what you could do with it if you were not applying it to debt payments each month. If you have $5,000.00 in credit card debt, a student loan payment and a car payment you may be paying between $300.00 to $700.00 in debt payments each month. If you had that much extra money to put towards savings or investing your wealth could begin to grow. Paying interest on your debt each month is just one of the habits of broke people.
Consider Your Freedom from Debt
It also means freedom. You can quit your job if you are not happy without the worry about whether or not you will be able to keep your home or be able to make your payments. It means freedom from the weight that debt has. Debt is a big worry that is always there in the back of your mind, even if you are pretty good at ignoring it. It means that you can make your money work for you and you can begin to build wealth.
Change the Way You Think About Debt
People often mistakenly look at credit as an easy way to get the things that they want now. They fail to look at the long-term consequences and costs that debt brings. Living debt-free allows you to live the kind of life that you want to live. It means that you do not have to worry about payments or what would happen if you were to lose your job suddenly.
It can be revolutionary to think about living debt-free. A life without payments is very different from one with payments. Debt-free living means saving up for things. It means making sacrifices and resisting impulse purchases. It means limiting the amount of money you waste each month. It means planning for the bigger purchases and making sure that you are using your money for the things that matter most to you.
Put a Plan in Place
To become debt-free you need to create a debt payment plan. First, you should list your debts according to the interest rate. Then you need to find extra money to apply, to your debt each month. It may mean cutting back on your expenses or taking on a second job. Then you apply all of the extra money to the first debt on your list. Once you have paid it off you move on to the next debt, applying the extra money as well as the payment amount from the first debt. You continue this until you have paid off all of the debts.
This system is also called a snowball plan because as the payments become bigger as each debt is paid off, you can pay off the remaining debts much more quickly. Depending on the amount of debt that you have you may need to focus for a year or two to pay off your debts. If you have a large amount of debt, it helps to break down the plan so that you have milestones that you meet along the way.
Commit to Staying Debt Free
Once you have become debt-free, you need to commit to not go into debt again. It means planning and saving money for bigger purchases. It means sticking to a budget, but all of these things are worth being debt-free. It is important to remember that freedom that comes with living debt-free. Do not let all of the work that it took to get there, go to waste, by taking on additional debt. An emergency fund can help you stay out of debt, but your budget is your best tool to stay out of debt.