Living free of debt may sound difficult and close to impossible in our world today, owing to the ongoing COVID Pandemic, economic instability and socioeconomic issues. Debt continues to be a persistent issue for millions of people across the globe. A lot of people have been burdened to the point where debt has stopped them from achieving their goals and doing something for themselves. Clearing your debt can be a huge challenge. However, the peace of mind that comes with living without debt is unrivaled. In this article we discuss 3 tips to help you live debt free.
Debt can be very easy to incur and in reverse quite difficult to get out of. Taking loans and going into debt is not always a bad thing. Loans offer access to quick funds, and can save you in cases of emergency. Loans are credit facilities that can give you financial support until you’re back on your feet. Some creditors can also allow you pay back your debt instalmentally. However, this is not always the case as debt can become a huge headache if they are not quickly cleared.
Pay Your Debt in Full
Of course, the first step to living debt free is to clear any existing debt. If you owe debt, pay it in full. Be intentional about it. Make a plan to pay your debt. In the words of Mark Cuban, “Pay your debts first. Freedom from debt is worth more than any amount you can earn”. Clearing your debt does not mean you should use up your entire earnings to settle creditors. There are two common methods to go about this: The Avalanche or the Snowball. The Avalanche method entails listing your debts in order of descending interest and settling those with the highest interest first, while you simultaneously pay up the remaining debts periodically.
The snowball method on the other hand, relies more on motive rather than the highest interest rates. With this method, you can make a list according to your preference. When the first debt is cleared, you can start paying for the second debt on your list. Creating a timeline for payments can also help you make this work.
Stop Spending at Random and Start Budgeting
Having a spending plan is one of the most effective strategies towards debt free living. A spending plan can be seen as a solid foundation upon which other habits to debt-free living can be built. You must have noticed by now that when money comes into hand without a plan, that money will mysteriously vanish and will have you thinking back. You may be left baffled as to what the money was used for.
Create a budget and cut down on random spending. For example you went to the market to get groceries and stumbled on a vendor selling microwaves of #20,000 at a 25% discount which is #15,000. You may think to yourself, “this is a good deal” and start scratching through your funds to make the purchase. If you currently do not need a microwave or it is not in your budget, then it is not an essential buy and can be considered a random purchase. Instead of thinking about the #5,000 you are saving, think of the #15,000 you are spending. In some cases, you may stumble on other “good deals” which may lead you to borrow money just so you do not miss out on the deal. Do not be tempted to join the Jumia Black Friday Train.
Its easy to make random purchases. You may see a beautiful shirt while you’re out with friends, or see one of your bros with a latest gadget and feel like you need to get it. These random purchases can be attractive and enticing and will make you want to treat yourself but you must evaluate the effects on your financial health. If you’re always making random purchases, then you may need to work on your budget.
Double Your Hustle
This may be pretty obvious. If you want to live debt-free, double your hustle and make more money! One reason why people go into debt is because their income is less than their expenses. That is, they make less than they need to spend. Whether it’s a health bill, funding for education, or business, we often find ourselves in situations where we need to make unexpected and unplanned spending. Most times, what we have is insufficient and the next option is to go into debt.
If you’re constantly going into debt because you’re not making enough money, consider starting a side hustle. Pick up some more work to increase your income. That extra money will help you achieving your long-term goal of living debt free. Taking up extra jobs may be a lot of work and you may not like it, but trust me when you have all that extra money to ensure that you stay free of debt, you’ll be glad you made the sacrifice.
Debt can be an obstacle to wealth building if it is not properly managed. Live within your means, improve your income, work your resources and develop your finances. When you have enough resources, you can begin to work out an investment plan and further grow your money through compound interest.
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Hi there! I’m Owen, a writer, designer, and a digital marketer. I create and manage content at OG Capital. I am a highly motivated individual who is very passionate about problem-solving. Reach out to me on social media and I will be more than happy to connect with you. Cheers!