3 Easy Ways to Get Out Of Debt and Gain Financial Freedom

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debt

The Oxford dictionary defines debt as money owed or due. It is not necessarily terrible, it turns bad when it goes unpaid, becomes unmanageable as it grows and starts taking a toll on you financially, socially and health-wise. Unmanageable debt is when your payments exceed your monthly net income, making it difficult to meet your monthly payments.

The following 3 steps will help you get out of this cycle and gain financial freedom.

1. Evaluate your Financial Status

This is important as it helps you to identify and understand your cash flow and burden; by making a note of your monthly income and listing your monthly expenditure to determine how your expenditure compares to your income.

If you’re spending excessively on non-essential items, e.g. eating out, buying movie tickets trim them and only spend money on expenses you absolutely require such as rent, car loans, food etc. Once you trim your expenditure, create a budget and follow it.

After evaluating your financial status, should you find that you have spare cash (disposable income) use it to pay off your debts.

2. Handle your credit card debt

Research has shown that people tend to spend a lot more when they use their credit cards. Therefore, stop using your credit card and start using your debit card or cold cash. This will ensure you only spend money that you have at hand.

Where possible pay above the required minimum amount on your card, this reduces the interest charged on the card and the amount you owe. In addition, if you have multiple credit cards with debt, pay down the high interest cards first to reduce the principal amount owed.

Aim to pay your credit card bills on time to avoid the high interest rates and severe late payment penalties charged for nonpayment

3. Seek Professional Debt Relief Options.

If options 1 and 2 don’t work, seek the services of a certified credit counsellor who will provide you with financial education and advise you on debt consolidation, providing you with a guideline on how to get out of debt. In addition, a majority of credit counsellors can contact your creditors and negotiate for lower interest rates, which is extremely helpful when making payment.

Once you follow the steps listed above, you should be on your way to financial freedom. The main step is to gain control of your debt to prevent it from becoming unmanageable. Therefore, understand your financial status, continuously manage your expenditure, always pay your bills on time and seek professional help when you feel overwhelmed by the debt.

Photo Credits: Pixabay