Tips for a Debt-Free Life

Many of us fit into two categories; those who are responsible when it comes to finances and those who aren’t. If you fall into the latter, you need to read this.  A debt-free life has as much to do with decisions we make at key moments as anything else. The important thing is that it’s never too late to live a debt-free life.  Here are four steps to start with.

1. Acknowledge that you have made bad decisions in the past- Sounds simple? Not really. As humans, we hate bad news. Especially when it’s our fault. So we avoid the truth until it smacks us in the face. In terms of money, this happens when we want to purchase a house.

Itemize expenses so that you have a clear picture of everything that you owe. Also, obtain a credit report. You can get one free report each year from each of the three credit bureaus. Get all three at three at different points throughout the year.

2. Create a plan- Break down all expenses into three categories; necessities (food, shelter), taxes (and other debts) and everything else. Then, create a budget that allots money to pay for the most important items first. Also, create an emergency fund. Start with $10.00 per paycheck.

3. Start paying down debt- Take a look all the items that you purchase daily. If there is something that you can cut out or minimize (having a beach picnic, instead of eating at a seaside restaurant), then do it. The money you save can go towards your debt.

4. Bestselling author Dave Ramsey suggests employing the debt snowball method for reducing credit card debt. Here’s how it goes:

  • Order your debts from lowest balance to highest balance.
  • Designate a certain amount of money to pay toward debts each month.
  • Pay the minimum payment on all debts except for the one with the lowest balance.
  • Throw as much money as you can into paying that debt
  • When that debt is gone, focus on the debt with the second-lowest balance.

By doing this, you will have a sense of accomplishment. So much of paying off debt is mental and it’s much easier to see those small victories adding up.

4. Talk with credit card companies- Many credit card companies will wave late fees, if you notify them ahead of time. They may wave annual fees as well.


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