Your most valuable asset and the only thing that you cannot get more of is time. Finite and yet easy to squander, your time is shared, sold, and traded all day long, and with little thought given to its worth. If you’ve amassed quite a bit of debt-free life, you may have to sacrifice a substantial amount of time to get rid of it.
Although people often look at debt in terms of its monetary value, it’s important to start seeing what you owe as a barrier to a comfortable retirement, more hours spent behind a desk, and countless days of living in anxiety rather than enjoying emotional peace. If you’re ready to get rid of your debt and want to start living debt-free, the five tips that follow will help you avoid costly and time-consuming missteps.
Ways To Create A Debt Free Life
- Think And Rethink Your Purchases Before Making Them
- Buy Your Big Ticket Items Used
- Pay Off Your Credit Cards Now
- Consider Consolidation For Unmanageable Debt
- Make Saving And Investing Your Top Priorities
1. Think And Rethink Your Purchases Before Making Them
According to financial experts, money habits are rarely rational. The most critical step towards eliminating debt is breaking the bad habit of making impulsive buying decisions. These can range from small and seemingly harmless purchases at the cash register to spur-of-the-moment vacations and unplanned big-ticket items. Although your dreams of dipping your toes in the sand after months of hard work can be made a reality by a last-minute airline deal, even sales prices can harm your bottom line if you’re making purchases that you really can’t afford.
Constantly mismanaging your money could leave you with a lower life quality than your income actually qualifies you for. If you don’t have a budget, create one. You can use a budgeting app to simplify this process. When you want to make purchases that aren’t written into your monthly budget, take ample time to make sure that they aren’t emotionally driven, and that they’re worth the time you’ve spent working to obtain the money for them.
2. Buy Your Big Ticket Items Used
When the time comes to replace your current car, consider purchasing a used model or a certified pre-owned one. Most people know that new cars lose thousands of dollars in value as soon as they’re taken off the lot. However, what many consumers don’t realize is that they continue shedding value at an accelerated rate all throughout their first year. Brand new cars additionally cost more to register and insure.
When you buy new, you’re also often stuck paying hundreds for unwanted dealer extras like distinctive paint stripes and protective paint finishes. Rather than taking on a massive auto loan, consider shopping for a late-model option that will provide the same reliability and performance.
This is also a good idea when buying boats, homes, and other big-ticket purchases. Pre-existing construction costs less than comparable homes that have just been built. This often remains true even after all necessary repairs, replacements, and upgrades have been factored in. When you take the time to shop your options, buying previously owned goods doesn’t have to mean forgoing things like convenience, comfort, top-of-the-line amenities, or impressive aesthetics. It can also mean being able to pay for your purchase outright or take on a far less significant debt load.
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3. Pay Off Your Credit Cards Now
Stop making the minimum payments on your credit cards. If you don’t, you’ll wind up spending a veritable fortune in interest and account maintenance fees, and you’ll always have another monthly bill looming in the future. Contrary to what many people think, carrying a credit card balance won’t boost your credit score.
Paying your credit cards off quickly frees your balance up for emergencies. It gives you options for resolving short-term cash flow issues without opening new lines of credit or taking advantage of high-interest loans. Best of all, the early and total pay-off of your credit card debt may enable you to sidestep interest entirely due to something known as the credit card grace period.
4. Consider Consolidation For Unmanageable Debt
Debt management becomes infinitely more challenging when money is owed to multiple parties. It also becomes more costly. For each bill that you miss, you’ll wind up paying late fees and additional service charges. If you’re struggling to stay on top of payments to multiple lenders and credit card companies, debt consolidation may be the way to go. When you consolidate your debt, you’ll get the benefit of a single bill, a single monthly payment, and a single, manageable interest rate.
However, as with all financial decisions, debt consolidation comes with both benefits and drawbacks. Not every consolidation company and every consolidation offer will help you reach your financial goals. For instance, many debt consolidation companies negotiate with collectors to eliminate late fees, excessive interest, and other charges that lie beyond principal balances. Although paying a lower amount than your total debt might feel good right now, your delinquent accounts won’t be recorded as paid in full.
There are also balance transfer credit cards and consolidation arrangements in which debtors obtain secured loans that pay their entire debt amounts off. These offers provide more room for consumers to manage their own relationships with creditors and to determine how their pay-offs will impact their credit ratings over time. Rather than signing up for the first consolidation offer that you’re qualified for, seek guidance from a financial counselor before making any commitments.
5. Make Saving And Investing Your Top Priorities
Unhealthy spending habits are often learned. Financial habits develop early in life through financial socialization. If you have massive amounts of debt, you may have grown up with parents or other role models who frequently bounced checks had to file for bankruptcy, or struggled unnecessarily to make ends meet.
If this is the case, it’s best to seek financial counseling before you actually need it. Working with a financial counselor is a mandatory step in filing for bankruptcy. However, if you make this step a voluntary one right now, you can avoid bankruptcy court altogether. Financial experts can tell you about different debt solutions, and they can help you learn more about the ins and outs of budgeting. More importantly, they can teach you strategies for quickly breaking bad financial habits and replacing them with new ones. When you make saving and investing money for good return top priorities, moving away from irrational, emotional spending decisions will become easier.
Armed with a feasible budget and committed to controlling your spending, you’ll have the best chance at improving your current and future financial health. With the tips above, and by carefully exploring your options in remediation, you can avoid common and costly missteps in your efforts to become debt-free.