Getting out of debt should not be viewed as the impossible dream because anyone with a plan and commitment to financial freedom can get out of debt. The first step towards financial freedom is developing a financial freedom mindset. Spend time thinking about how great it will feel to be completely deficit free rather than worrying about paying next month’s minimum credit card payment.
Many people believe that they can get start to invest their money before getting out of debt which of course is possible but is not financially prudent. The most important goal is to first eliminate obligations and once deficit is eliminated one can look at investments. However, one must, while working to eliminate financial obligations, begin to build a savings account.
Build an emergency savings fund of at least five hundred dollars, preferably one thousand dollars, which will be used instead of a credit card in case of an emergency. Once the emergency savings fund is in place start to pay off the credit card balances one at a time. Start with the card with the lowest balance by sending in as much as can be afforded each month from one’s household budget.
Once the credit card with the lowest balance is paid off start to pay off the next lowest card balance and then move on to the next one and so on. After the credit cards are paid start to pay off the car loan. Once the car loan is paid off then start to pay off the home mortgage.
Most people, if given the choice, would rather keep their money than give it away to the bank. But this is what people do; they give their hard earned money to the bank, by taking thirty years to pay off their mortgage. Start paying off the mortgage early by sending in a payment each month to pay off the principle of the loan in addition to the regular house payment.
A home mortgage can be paid off in half the loan’s life or even sooner in some cases. Start by sending in two checks each month one for the home loan payment and another check to pay off the principle balance on the loan. Paying off the principle reduces the finance charges and also hastens the loan payoff and also builds confidence and a financial freedom mindset.
Getting out of debt does not have to be a gigantic undertaking but eliminating debts will only happen through concerted effort. Start by building a savings fund that will be used in emergencies instead of relying, like most people, on credit cards for emergencies. Start to pay off the lowest debts and once the lowest debts are paid off move on to the next financial obligation and build the momentum towards financial freedom.
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