Do you handle different debt and don’t know where to start paying? Whether it is a loan, credit card, or car mortgage, debt is costing you more money and hindrance to your financial goals. Follow this handy guide and be debt-free as quickly as possible.
Create a budget
If you do not have a concrete budget yet, creating one will be a great idea. Having one will enable you to carefully plan and organize your finances well. Also, it is a way to tell you where your money goes.
Start by looking back at your last month expenses. Determine whether you are overspending based on your income.
Then, use budget apps to help you categorize your expenses and set a limit for each one. This way, you will see if you are spending beyond your income. If yes, you will need to cut on other items.
List all your debt
To have a full glimpse of all your balances, list all your debt. This will enable you to see where you are now with your payables.
Organize it by interest rates, from highest to lowest interest rates. You can also add the due date of each one to see which one you will prioritize.
When you finish listing it, start prioritizing the debt with the highest interest rate since this one is costing you more.
Pay more than the minimum balance
When you have identified the priority debt, start paying more than the minimum balance each month toward the debt with the highest interest rate.
Then, once you are done with the highest one. Do this strategy toward the debt with the second highest interest rate and so on. This trick will save you most of your money over time.
Downsize for the meantime
Paying off your debt is not forever. And while you are in the season of paying it, opt to downsize and cut some unnecessary expenses.
Take a look at your last month’s expenses. Did you dine out too much? Bought that clothes because it is on sale? Pay special attention to those monthly subscriptions and impulsive purchases that can accumulate big money over time. Cut these items and allow the extra money to pay off your debt or put to your savings.
Sell unnecessary items
Take a look at your house. Determine furniture or other items that are taking up that space in your room, which you do not really need.
Have a wardrobe checking as well. Do you really need to have a more than a dozen jeans? Are those blouses still fit you? Do an inventory of these items and sell those that you do not really need anymore.
You can a garage sale at your home or sell everything online. This step will eliminate unnecessary items in your home and enable you to earn extra income to pay for your debt.
The first step to financial freedom is to be debt-free. As soon as you eliminate this, the earlier you will achieve your goals. Just do these easy steps and decrease your financial burden.