Most People Do Not See a Debt Free Future

Debt is a way of life, for individuals, for corporations and for governments. Its prevalence makes it completely acceptable, but it does not result in comfort, security, and a sense of freedom. These benefits are reserved for people who have become debt free and intend to stay that way. If you have wondered if you can find the golden path to financial nirvana, the answer is a resounding yes. You, too, can become debt free for life, if you commit yourself to that goal and make every financial transaction from this point with that goal in mind.

A Budget is the First Step

You cannot possibly begin a plan to become debt free if you do not know what your current expenses are. You need to spend a month writing down every penny you spend, so that you can determine where your money is going. You may be surprised how much you “waste” on frivolous things and how much you could be putting toward debt repayment. Decide that only the essentials will claim your money from now on.

Eliminating the Debt

You need to list all of your debt, from the smallest to the largest, including your mortgage if you have one. You are now a soldier, eliminating your “enemies” one at a time, beginning with #1 on your list. Take all of that money you’ve been spending on frivolity and dump it on debt #1, adding it to your regular minimum payment. Make the minimum payment on all other debts. As soon as debt #1 is paid off, the entire amount you have been paying will now be added to the minimum payment on debt #2 until it is eliminated. Following this plan will eventually get all of the “bad” debt paid. The next step is the “good” debt, specifically, your mortgage. If you were able to add all of your former payments to your mortgage payment, you can make a large dent in the principle of that loan quite quickly.

This entire process can take a great deal of time, especially if you have a lot of debt. But, if you stick with it, you can become debt free, and that is the long-term goal.

A Word About Savings

As you progress toward your debt free status, you will also want to think about your savings and investments. For, if an emergency should arise, you will want to have the cash on hand to meet that expense without having to incur new debt. It is a good idea to try to put some small amount each month into a savings or money market account, so that it is available immediately if needed. Larger sums, like tax refunds should probably be placed in more permanent savings, not easily accessed when temptations to spend impulsively arise.

Debt Consolidation

If your debt is really cumbersome, you may want to consider a debt consolidation loan to ease the pain. If you can combine all current “bad” debt and obtain one lower monthly payment, you can plan to save more each month as you pay that debt off. As your income increases, make double payments on the consolidation loan so that it can be paid off as quickly as possible.

A Final Word

You cannot find the golden path to financial nirvana unless you are committed. Though the path is golden, there are lots of false detours to thwart your progress. These are usually in the form of those impulsive spending behaviors, the desire to impress with others with expensive gifts, and the unwillingness to sacrifice. Put on your blinders and keep going.