Debt Free … Forever?

Being debt-free can seem like a pipe dream.  However, it is possible.  A lot of progress can be gained step by little step. It is important to just start by taking the first step.

Know Your Interest Rates:  An important step to becoming and remaining debt-free is knowing how much you are paying for your debt. Canadian credit cards charge anywhere from 20 to 24 percent interest. That is a huge percentage and will rapidly increase the amount of debt you have.

Consolidate debt:  If you’ve accumulated credit card debt, the best way to manage it is to consolidate that debt onto a low rate line of credit, and perhaps even close all credit card accounts, switching instead to a debit card. Lines of credits tend to hover around 5% interest, which would substantially decrease the amount of interest you will be charged each month.

If you need to negotiate payments with the financial institution(s) that too is an option. It is possible that by contacting your creditors, you can negotiate a reduced settlement or a more manageable payment schedule.

It is important that you know in clear numbers how much you owe and what the interest rate is so that when you can make payments on your debt, you are paying off the debt that is costing you the most. Keep in mind that you should still always try to make the minimum monthly payments on all debt.

Track your spending:  Once you know how much you owe and at what rate(s), tracking your spending is the most tangible and easiest way to get started on the road to a debt-free life. Either note all purchases or save receipts and take note of them. This way, you can know where your money is going. A good app to help track spending and provide for basic budgeting needs is Wally. Unlike many other budgeting services, Wally is free! By tracking your spending, you will slowly get into the habit of being more aware of your purchases, and cutting back on what is excessive.

Budget:  A budget doesn’t necessarily mean scarcity, it just means that you know where your money is coming from and where it’s going. That way, you can better plan and monitor your spending. True to its name, the app You Need A Budget helps you live within your income and see what can be done to balance your budget. This app works on mobile phones and desktops, and enables you to build your budget while taking into account living expenses, debt, and investments. Other websites/apps to track budgeting and spending include Mint and Budget Tracker.

Don’t rush it! Your motivation will disappear if you try too much too fast and don’t adjust to budgeting at a pace that works for you.

Budgeting will not only enable you to contribute as much money as possible to debt repayment, but also help your spending and saving habits once the debt is gone. This way, you can enjoy a debt-free life as much as possible and even being able to spend money guilt-free.

Stop spending:  Until your debt is paid off, it is best to rein in as much spending as possible. Using savings to pay off debts is a good idea, but make sure to replenish those savings as soon as possible.  And having an emergency fund is still necessary.

Be consistent:  Try to be consistent in your payments: pay off as much debt as you can afford to regularly.

When you reach milestones, celebrate! You deserve that feeling of freedom and positivity! The greatest reward is that you will be on your journey toward being debt-free forever.