Most of us are familiar with debt, whether it is a few hundred dollars on a credit card, or mountains of debt that offer little hope of paying off. Whether you owe a little or a lot, reducing or eliminating debt will set you on a path to financial freedom. The earlier in life you begin, the brighter your future will look. Here are some simple steps toward debt-free living.
Next, go to your creditors and try to negotiate lower interest rates. This may not be possible with mortgages or car loans, but many times, credit card companies will work with you if you explain your financial problems, and offer an interest reduction. You can also take advantage of offers to transfer existing balances to a low-interest credit card. Some even offer zero percent interest for up to a year on balance transfers. This will save you money and get all of your credit card debt lumped together, so that you only have one monthly payment.
The next type of debt to work on is loans. You may have car loans, personal loans or home equity loans that incur high amounts of interest and add significantly to your overall debt. The best way to reduce this debt is to re-finance your home and pay them off. You may be able to find a new mortgage that offers a much lower interest rate as well as giving you some cash to pay off other debt. With the money you free up, try to make two extra mortgage payments per year and you can sometimes pay off your mortgage in half the time you normally would! If you are a renter, a personal loan can allow you to pay off other debt and give you a lower interest rate.
Make sure that you always diversify all your investments. You should never invest in only a single business entity. Although the business could explode and you could make lots of money, there is also a chance that the business fails miserably. If the latter occurs, you could end up losing a lot of your hard-earned money. All financial experts recommend diversifying. Keep in mind, however, that diversifying does not cut your risk down to zero. There is always going to be some risk involved in investing no matter what. The key is reducing this risk as much as possible.
Make sure that your prioritize your expenses in order of most important to least important. This helps you determine how you should spend your money whenever you have any extra coming in. For example, if you prefer eating out on occasion over owning all the latest technology, then skimp out on the technology and go eat out. This is what an expense priority list is for. It helps you determine what you should spend your money on and what you shouldn’t.
Keep track of where you spend your money. In fact, keep track of every penny you spend. This may seem like a large undertaking but you need to do it. It helps you to see how much you spend in a day. You might realize that you spend more than you thought you did. Record every single thing you spend money on, even if it’s just a few cents at the vending machine. That will keep you aware of your money and help you stop spending so much of it.
Save all your extra change. A lot of people have seen their parents put their change in a jar at the end of the day. This is a smart thing to do. You get the psychological effect of seeing the money add up, and you also keep the change that would otherwise end up in the folds of the couch.
As long as you have knowledge and some self-control, you can live a secure financial life. Apply the above tips, and you’ll be on the right track towards living a debt-free life.