How to Become Debt Free – A Step By Step Guide

Do you have huge debts? If yes, this article gives you an excellent working plan and best practices to become debt free.

If one stuck with debts, it would be difficult to plan his or her finances in a better way.Whenever planning to create an emergency fund or investments for future, all the such plans will pull back by the existing debts.

In order to come out of this panic situation, one should work well to completely pay-off the debts.

Most of us have debts.  But, if it is unmanageable and huge, then need to worry a little because it is the visible symbol of week personal finance planning!

What should be done to become debt free?

Here is an excellent working plan to follow and become debt free gradually:

– Any person suffering from huge debt should start work from the beginning. Start by listing all the debts in a paper. Prefer to list down the debts based on its interest rates and then sort it from higher interest rate to lower.At the end, you will get an idea on which debts are forcing you to pay more interest and eating money.

– Next step is to prepare a well-disciplined plan to kill the debts one by one as soon as possible. Start the action through tightening your monthly budget.You must visit and read the article “Budgeting Finance – A Step by Step Guide” to know how to budget your finance successfully to get financial control.

Once the budget is ready, be disciplined to live within the budget by focusing to become debt free.

– Prior to start the debt free process, ensure having enough money in hand or identify an immediate money source to head off any unexpected financial crisis.Having a small emergency fund in a separate also a parallel option. This will work as your contingency fund to meet any unexpected crisis happening at the middle of your ‘being debt free’ run.

– Start eliminating the debts one by one by paying minimum amount to the debts have lower interest than the one which tops with higher rates. Pump maximum possible money to those debts and continue this process until paying-off the debt.Select the next one in the list with next top interest rate. Do this practice with all debts until completely paying-off all debts.

– Consider additional source of money to pay off the debt. Having a second income through any family member would be a great help to focus more to pay-off the debts.Explore and identify all possible sources and work to generate maximum possible additional income to support your action.

– Record each activity and analyse progress of your action time to time.

Once become debt free, stick with your budget to not fall to the debt trap again. Currently, rework on your family budget to get some relaxation.Cut down all unnecessary expenses, identify and generate secondary income stream, have a plan to shield yourself and family from panic situations like economic recessions.

Visit the first part of this series to get idea on income generation, insurance etc.

Dedication and discipline are the two most required qualities a person should have to sustain with personal financial planning. Being debt free is not simple once if don’t have focused mindset and a clear working plan.

Upon being debt free, a person generally gets good idea on how he or she came to this position. Never commit the same mistakes again.Be disciplined with self and family expenses, credit card usages, borrowing etc. Preserve each penny for a bright feature of self and family.

Practice Dave Ramsey’s Snowball Method to Become Debt Free Fast

Dave Ramsey’s debt snowball method is a popular debt-reduction strategy that focuses on paying off debts from smallest to largest, regardless of interest rates. The goal is to quickly achieve small victories and build momentum, which can motivate you to stay on track with your debt repayment plan.

Here’s how the debt snowball method works:

1. List your debts: Create a list of all your non-mortgage debts, including credit cards, student loans, and personal loans. Arrange them in order of smallest to largest balance.
2. Make minimum payments on all debts except the smallest: Focus your extra money on paying off the smallest debt as quickly as possible. Continue making minimum payments on all other debts.
3. Once the smallest debt is paid off, roll the payment into the next smallest debt: Take the minimum payment you were making on the first debt and add it to the minimum payment of the second smallest debt. Repeat this step until all debts are paid off.

The debt snowball method is particularly effective for people who are easily discouraged or who have a lot of small debts. Seeing quick progress can be a powerful motivator, and the method can help you build the discipline to stick with your debt repayment plan.