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Debt-Freedom

Identify the root causes, check your spending habits, adjust your spending, get support, and believe in yourself to live debt-free.

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How to Achieve Debt Freedom and Feel Secure

How to Achieve Debt FreedomDebt can cause stress impacting your health and wellbeing. It’s a ball-and-chain that prevents us from living our dream lifestyles. Whether you have a mountain of student loans or credit card debt being shackled to these debt obligations is a frightful one.

You can live debt-free. However, the success of any debt pay off strategy starts with addressing your relationship with credit and your debt mindset.

Debt is a result of your credit usage. It comes from spending more than you can afford. I used to push the blame on the creditors for their high-interest rates and fees. Until I realized the common denominator was me and my relationship with credit.

If you’ve been in debt and now live debt-free, I’m sure you can attest to the peace of mind. You can sleep better, you’re more relaxed, and overall you are a happier person. When you don’t have debt looming over you, you’ll experience less financial stress and improve your wellbeing.

Change Your Mindset and Live Debt-Free Forever

Identify the root cause

Credit isn’t the problem. The issue is how credit is used that leads to debt. There’s an underlying reason why we spend the way we spend. You must identify the root cause of overspending, credit usage, and debt accumulation. Once you find out what is perpetuating your debt mindset, you can now make the necessary changes to cut back, save, and pay off debt.

Imagine your debt as a tree and you want to remove the tree so you can see the sun’s rays. If you only cut the branches, they will grow again. To keep the tree branches (debt) from growing back and blocking out the sunlight, you’ll need to remove the root.

Learn more:

Reduce Your Stress

Having debt can be extremely stressful keeping you from enjoying your life. Learn how to reduce debt stress and improve your financial wellbeing.

1. Contacting Your Creditors
Contact your creditors immediately if you’re having trouble making ends meet. Tell them why it’s difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level.

2. Dealing with Debt Collectors
Federal law dictates how and when a debt collector may contact you: not before 8 a.m., after 9 p.m., or while you’re at work if the collector knows that your employer doesn’t approve of the calls.

3. Managing Your Student Loans
Student loans are a special kind of debt that only has a rare occurrence of being discharged during bankruptcy. With federal student loans, you have federal benefits that can give you a reprieve.

4. Managing Your Auto Loans
Your debts can be unsecured or secured. Secured debts usually are tied to collateral, like your car for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your car or foreclose on your house.

5. Managing Your Home Loans
If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to work with you if they believe you’re acting in good faith and the situation is temporary. Some lenders may reduce or suspend your payments for a short time.

Debt Elimination Strategies

Take the time to list all your debt obligations. It’s important to know how much total debt you have to create an effective repayment strategy.

Prioritize the different types of debt so you can focus your efforts to tackle the most expensive types of debt. Ultimately the goal is to prioritize, reduce, eliminate, and free yourself of all debt.

Learn more: Debts You Shouldn’t Fear and Why

Credit Card Debt Payoff

Credit card debt is a costly type of debt with revolving lines and high-interest rates. A small debt can grow to an uncontrollable amount if you only make the minimum monthly payments.

Get rid of your credit card debt:

Student Loan Payoff

I know you’ve heard it already people say avoid student loans as much as possible or don’t go into debt for school. Those statements aren’t helpful when you already have student loans.

As someone who’ve paid off student loans, I’ve written articles on how you can reduce, refinance, and get rid of your student loans sooner than later.

Eliminate your student loans with these strategies:

Debt Management Plans

Debt management is the process in which you manage the repayments of debt. You can create your own debt management plan or have a credit counseling organization to assist you with a plan.

Learn more: How to use a Debt Management Plan (DMP)

Speak with a Bankruptcy Attorney

If your debt is overwhelming impacting your health, consider speaking with a bankruptcy attorney. Learn about your rights under the law and options to explore. As with any area of the law, it is important to carefully select an attorney who will respond to your personal situation.

Learn more: How to find a bankruptcy attorney

Steps to Becoming Debt Free

Create a detailed list of your income and expenses.

Now, that you have a better idea of the root cause of your debt situation, it’s time to get into the details of your finances. You’ll need to analyze your income sources and expenses. Create two columns and title the first column Income and the second column Expenses.

  1. For the first column write every single source of monthly income you receive (e.g. salary, interests, dividends, part-time jobs, side hustles, etc).
  2. On the second column, write down all your expenses or things you spend money on such as rent, food, utilities, shopping, entertainment, etc.
  3. Total up the income and subtract the expenses and this will give you the amount that is left over. This is a quick and dirty way to start a budget too.

If you determined you don’t have enough money, then it’s time to make some serious spending cuts. Early in this process, it will be easier to decrease your expenses than increasing your income.

Effectively use credit to lower interest rates and streamline payments

Once this is completed you will know how much money you have left each month to pay towards debt. Consider a debt consolidation loan or student loan refinancing to reduce your total cost of borrowing and speed up repayment.

If your credit score is an issue, work to improve your credit.

Continue to prioritize what you “need” and “want.”

I’m all for getting the things you want just as long as you really love it. However, we must place an emphasis on the basic needs first before spending on the wants. You may want to buy the brand labels over the generic for a number of reasons. Ask yourself if the generic brand can fulfill your actual needs.

If you need a car to get to and from work, do you really need a luxury car to meet that need? Chances are you don’t and choosing a least expensive option frees up more of your income to debt repayment.

Cutting back on expenses is putting your long-term wellbeing over present temporary satisfaction. But, the priority today should be to pay off debt so you can live more comfortably and spend more time enjoying the things you own with the people you love.

Learn more:

Make more money and pay off debt

The less debt you have reduces the number of hours you need to work to earn money. When you carry debt, your future hours are obligated to working for money. And if you’re looking at controlling credit, tackle your unsecured debt first which is usually a result of credit card use.

Find ways to make more money through side hustles and use what you’ve earned towards your debt. Carrying less debt contributes to overall well-being.

Get encouragement and support networks

Debt can be embarrassing but what’s even worse is the stress of having debt. Seek out support from others by reading blogs of those who are also removing the chains of debt.

There are many other resources available for support as you climb out of student loan debt or credit card debt.

You can also speak with family and friends and get the support from within your inner circle. We all have stories to tell. We’re getting to a point that money is no longer a big social taboo. Listen to their stories because it could help you find the right strategy to pay the debt off sooner.

Stay positive and believe

It’s hard to think positively when there is that mountain of debt. Stay positive. Believe the light you’re seeing in the tunnel isn’t a train heading towards you. The light is getting brighter because you’re walking the path to get yourself out of that dark debt tunnel.

Work on having a positive mindset. It’s crucial in order to tackle debt head-on. Research has shown that positive thinking has an effect that can lead people to overcome tough challenges.

When you address your mindset, you’ll be able to follow through on your debt repayment strategies. And with the right mindset, your debt can be repaid sooner.

If you’ve been in debt and now live debt-free, I’m sure you can attest to the peace of mind you have as you go about your day. You can sleep better, you’re more relaxed, and overall you are a happier person.

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Jason Vitug

Jason is the founder of phroogal, creator of the award winning project Road to Financial Wellness, and author of the bestseller and New York Times reviewed book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.

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