Many of us have not been lucky to escape the of debt trap completely. Even if it is only student loans, most of us have some form of debt that we are paying back. If you fit the bill and you’re thinking that you don’t need to start worrying about becoming debt-free until you’re older, you might want to think again because developing smart financial habits while you’re still in your 20s and becoming free of as many debts as you can possibly manage will make life far easier for you when you’re older and looking to settle down.
You might not think it’s possible, but if you use the following methods, you could really be debt-free by the time you’re 30, or if you’re already there, at least by the time you’re 40:
Use the Snowball Method
There are those that say paying off your biggest debts first is the only way to become debt-free fast and there are those who disagree preferring to use the snowball method to clear their debts. We think that for millenialls and people who struggle with finances, the snowball method is most often effective because it allows you to see progress more quickly and that can help you stay on track. What is the snowball method? It’s the method whereby you pay off smaller debts first, thus clearing them and seeing some real progress right away. Once you’ve cleared one debt without too much pain, it’s easier to keep going and soon small actions spiral into huge gains until you’re debt-free and much better off.
If you have a lot of credit card debt, loans and store credit that you’re trying to pay off, taking out a personal loan, from somewhere like personalloan.co and using it to pay off all of the other debts is a very attractive option. Why? Because then you only have one monthly payment to worry about, which will typically gain far less interest than all of your other debts combined.
Set Up a Budget
Budgeting might not be a whole lot of fun, but when you know exactly how much you have coming in and going out each month it’s much easier to cut out the excess, work out exactly how much you can afford to spend on luxuries and focus on paying down your debts.
Grow An Emergency Fund
This may seem counter-intuitive when you’re trying to free yourself from the burden of debt – shouldn’t every penny go to paying it off? Having an emergency fund of $1000 or so will give you a much needed financial cushion should you need to repair your car or pay for an unexpected medical bill, which means you won’t end up having to add to your debts when you should be minimizing them. In my opinion, the best time to do this is after christmas if you received many monetary gifts. Another great time, with your tax refund when you have a nice surplus of cash in the bank!
Don’t Live Above Your Means
Finally, if you can avoid buying things you know you can’t afford (put the credit cards down!), you will be able to pay your debts off more quickly, and once they’re gone you can think about adding a bit more luxury to your life.
If you have/had any debt, what are some things you are doing/did to settle it quickly?
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