Budgeting and debt repayment tips to get financial freedom.
Using a credit card or taking a loan can be an effective financial plan if done correctly. Yet sometimes things don’t always go as planned and somehow you end up with more debts than you desired.
Now paying off your debts might look like a long journey. And no, paying the minimum payments is not the way to do it. Read on to find the ultimate game plan to bid your debts goodbye for good.
Organize your debts
Before you start making the plan, you need to list down all of the debts you have – be it credit cards, loans, money you borrowed from your friends – everything. Also, write down how much money you make every month.
Sort your debts
Different debts are likely to have different interest rates. Maybe credit card A has 3% interest rate, and credit card B has 5% interest rate. Write down the interest rates of all your debts and sort them from highest to lowest. For example, credit card B will rank higher than credit card A because it has a higher interest rate.
Focus on one debt
Now that you have sorted your dates by interest rates, you would want to actually start paying them off. The key to do it is to focus on one debt at a time, starting from the one with the highest interest rates. By doing this, you are helping yourself to save more money and keep more interest from accumulating.
Get extra money
Paying off debts comes with a little hard work. Other than your normal, stable income, you may want to do some extra work and get extra money. Good at baking? You can sell the cookies you bake. Good at designing? Find a freelance design job. Although this extra work may take a little bit of your time, you will find the extra money helpful in your debt repayment journey.
Save, save and save
With the extra money, you might be tempted to use all of it to pay off your debts. But no, you still need to have savings. It is no use if you keep paying your debts, yet you don’t limit using your credit cards. Your savings will be the last resource of help on a rainy day, so keep saving.
Budget your spending
How much money you spend on food, gas and others depend on how much money you make. You can create a monthly budget plan to avoid spending money on the not-so-important things. This way, you will have more money left at the end of the month that can either go to savings or paying debts. You can read more about budgeting tips here.
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