6 Steps to Become Debt-Free
- January 10, 2021
- by Elaine Harrison
Think of a goal that you’ve set for yourself. Maybe there’s a book that you want to finish, you want to start exercising three days per week, or you want to take the first step in changing careers. Those are all great goals, and there is one more that I want to put on your radar.
I want to talk about a practical goal that many people work towards every day: Living debt-free. For some people, this goal might seem more daunting than the others. For other people, living debt-free is a boring or tiresome goal. The truth is, it’s one of the most important goals you can have, and one that is very possible to reach.
The first thing we need to do to get out of debt is to understand what debt is. Simply put by Oxford Languages: debt is “the state of owing money.” Owing money on a car, student loans, credit cards, etc. puts you in debt. It may sound scary, but remember, it is possible to get out of debt and live debt-free. Just like with any goal, getting out of debt and staying out of debt takes work and commitment. Here are some suggestions that you can use to reach your debt-free goal.
1. Determine how much you owe
Add up all of your debt. Then decide how much you can pay toward your debt each month. You can determine how long it will take to pay off your debt by dividing how much you owe by how much you will pay each month. If you owe $1,000 and you pay $100 toward that debt each month, it will take about 10 months to pay off your debt. ($1,000/$100 = 10 months)
2. Determine your cash flow
It is important to know how much money is coming in as well how much is going out. Once you know where your money is going, you can adjust your cash flow to minimize extra costs so that you can put more money toward your debt.
3. Create a spending plan
A spending plan helps to keep you on track as you work toward your goal of living debt-free. It prioritizes needs and wants, and it helps make your cash flow more predictable.
4. Save for emergencies
Sometimes the unexpected happens, and sometimes the unexpected is unexpectedly expensive. It helps to have a safety net, just in case. This is another area where a spending plan and adjusting your cash flow comes in handy. In addition to paying off your debt, set aside at least 10% of your income in a savings account. This may not be possible right away, but it is important to start by setting aside as much as you can to help with emergencies.
5. Find a financial coach
It is much easier to reach a goal if you have an accountability partner to help you! A financial coach will help you with these steps and more so that you don’t have to go it alone.
6. Be patient
It took a while to accumulate debt, so it will take a while to get out of it. Just keep working toward your goal and you can reach it!
Working toward living debt-free can seem like daunting goal, but it is attainable and important. With hard work and commitment, you can live debt-free!