Step By Step Guide To Be Debt Free
For one reason or another, you may at one point of your life find yourself so deeply in debt and aren’t sure how to go about it. While there are times when you need debt management services, most times, it’s possible to work yourself out of the pit, by being prudent and disciplined in your approach.
Today we look at a step by step approach to getting out of debt.
1. Honestly assess your debt situation
The first step to recovery from any life crisis is honesty and this is no different when it comes to debt. I have been deeply in debt before, and I can tell you being honest to yourself about it is the hardest step. Facing your debt situation at times means admitting that you are a financial failure. Unfortunately, ignoring your debts doesn’t make them go away, it just makes things worse day by day.
List all your debts, starting with the least, to the greatest, then take a deep breath. This is the first, and most important step to financial recovery. If it’s any consolation the Britain’s personal debt is for once greater than their GDP. You’re not alone, but you could stop being part of the statistic.
2. Draw up a plan
After you have listed all your debts, make a realistic plan on how you’re going to pay off the debts. I recommend the Snowball Method, where you start off with your smallest debts, which releases money to settle the bigger debts. Throughout, don’t forget to pay yourself, set aside a small amount of money towards building up your emergency fund.
I will write about the why, and how of emergency funds in the next post, look out for it if you would like to know more.
3. Be honest with your debtors
When you’re in debt, it’s often easier to hide from your debtors with the hope that you will manage to pay them before they pin you down. This is however not only damaging to your reputation, it could land you in court if your debtors get impatient. After you have a plan, share it with your debtors as candidly as possible.
Be honest, but do not let your debtors intimidate you. You’re owe them money, not your life. Any debtor will agree that a payment plan is better than no payment at all.
4. Get on with it, but remember to celebrate
After you have done the above 3, start paying off the debts little by little, month by month. I can’t promise it is going to be easy. It took me slightly over a year of extreme sacrifice to pay off my debts, but the resulting financial freedom is worth it.
Whenever you pay off a debt, take time to celebrate, even if it’s with a tub of ice cream
Good luck!
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