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Secrets to Becoming Debt Free for Life

July 05, 2012 | Comments: 0 | Views: 188

Regardless of how deep you currently are in debt, becoming debt free for life is just a matter of changing some old habits. All it takes is discipline and proper planning, even after years of increasing your total debt every month and carrying heavy credit card balances. It will require a lot of sacrifice, but once you have chopped off a large chunk of your debt and interest no longer eats up a major part your income, you will start to enjoy more spending power.

Following are some debt free for life secrets that may help bail you out from the current financial rut you are in:

Assessing Your Situation - The first step to achieving financial freedom is to assess your situation. Calculate your monthly cash flow - 1) the sum of all your expected income (inflow); and 2) the total of all your fixed and unavoidable expenses like minimum dept amortizations and other fixed expenses; and your variable spending like clothing expenses.

Creating a Realistic Budget - Prepare a budget that should cover for all your essential spending like food, rent mortgage, insurance, gas, utilities, and minimum payments. You may include a provision for some variable expenses such as entertainment and recreation.

Creating a Surplus - Reduce or take away all unnecessary spending until you achieve a surplus. Things you can do include eating out less and finding ways to lower insurance costs. If after exhausting all possible measures, you still do not have a surplus, you may get an extra job or try working overtime just to generate extra income. You may even consider moving to a smaller and more affordable place or selling an extra car.

Lowering Your Interest Rates - Find ways to refinance mortgages and other similar debts to ones that charge lower interest rates. Maintain only the low-rate credit cards and drop the others. Another way is to directly communicate with lenders and inquire how you can reduce the interest rates on your existing accounts.

Stop Charging - Adding more to your debt will only make it more difficult for you to become debt and mortgage free for life. Breaking the cycle of debt that you may have been so accustomed to is a very important step if you are to achieve your goal faster.

Settle Debts Early - This is where your budget surplus comes in. Use it for the early settlement of existing debts, and not just to pay for the minimum due each month. A good strategy is to start off with ones that bear the highest interest rates. You will gain more interest savings this way. A different, but also an effective approach, is to completely settle the smallest balance first. The idea of being able to settle debts quickly may provide a psychological boost that will help you build up the much-needed momentum to take on bigger debts later.

Accumulate Savings - To keep you from incurring debts in the future and stay debt free for life, set aside a fund for emergencies. Try investing in easy-access instruments like a money market account. Start small, say $1000 and build up as you gain more surplus in the succeeding months.

If you are struggling with your debt today and want to become Debt Free For Life, you can read our latest post at How To Eliminate The Debt for your own information.

Source: EzineArticles
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