5 Steps to Jump-Start Your Debt-Free Journey

Posted by on August 30, 2019 in Economy, Frugal Living with 0 Comments

If you have made the decision to begin your debt-free journey — congratulations, this is an exciting step toward financial freedom.

While this is a challenging decision, it is one of the smartest choices you can make for your future. Debts hold you back and prevent you from living your life to the fullest.

Growing both personally and professionally becomes hard when you have this type of burden in your life. Regardless of what your next goal is — getting married, buying a house, launching a business, traveling the world — the first step to accomplish it is becoming debt-free.

It only takes a few wise decisions in the present to achieve financial freedom in the future. Do not be afraid to take that first step. You have the power to transform your life and build a better financial future.

1. Get Inspired by Success Stories

Looking at your debt and then looking at your personal financial statement can be overwhelming. It might be even hard to believe that you will be able to achieve financial freedom one day. So, it is important to look into success stories from people who have been on your shoes and now are free from debt.

While there are some common tips and tricks that can help, everyone takes a different approach to achieve financial freedom. One single mom, for example, used a unique budgeting system to pay off her loans. Kumiko Love struggled with her student loans for years. She had a successful career in the finance industry, but she could not get control of her own finances. No matter how many different budgeting techniques she used, she was still short on cash at the end of each month.

The biggest change Love made was budgeting for each paycheck instead of for the entire month. This allowed her to have extra money to pay off her student loans. After three years, she managed to pay off $77,000.

In a different case, Steve Donovan made headlines for paying off the $118,000 he owed for student loans, credit cards, an auto loan, and a personal loan. One day, his student loan company tripled his payment. Donovan was forced to sell his luxury car and move back to his parents' house. Selling the car dropped his financial burden to $90,000, but he was still dealing with huge monthly payments.

Unlike Love, Donovan decided to use the debt tornado technique. He worked as an assistant bank manager and sold clothes on eBay to earn extra money. Rather than pay off the smallest bill first, he tackled the loan he disliked the most. Since his lender tripled the payment for his student loans, Donovan decided to use his anger to pay off that bill first. It took five years, but Donovan eventually paid off all of his debts.

By switching to only cash, Kristy Epperson managed to pay off $20,000 in only a year. After Epperson graduated with a degree in nursing in 2017, she had about $16,000 in student loans. She also had $4,000 to pay off on her car loan. Despite her loans, she became a homeowner with a 5 percent down payment. This forced Epperson to reevaluate her financial health.

Together, Epperson and her husband decided to use the debt snowball technique to pay off their loans. Epperson got a second job as a substitute teacher and used a spreadsheet to track her spending. One of her biggest problems was reaching for her credit card whenever she wanted something. By switching to cash, Epperson was able to visually see where her money was going and change her spending habits.

Each of these people actually used a different technique to pay off their loans. The main thing that they shared in common was their desire to achieve financial freedom. No matter where you are at on your debt-free journey, the most important factor is how much you want it. If you want financial freedom badly enough, you will be able to find a way to achieve it.

2. Make a Monthly Budget

If you want to save money and pay off your loans, you must become almost a budget obsessive. Without a budget, it is hard to keep track of expenses and you will likely end up spending more than you expect every month.

Start by listing how much you have in debt, credit card payments and other bills. Make sure to make a list of the order that you plan on paying off your loans.

If you are uncertain about how much you spend on entertainment costs or groceries, for example, try tracking your spending habits for a month or two. You will get surprised.

Once you have control over your budget, you will understand the many different ways to cut your costs. Making coffee at home, cooking dinners at home and choosing free outings, like hikes, are just a few of the ways you can save money.

3. Take Advantage of All Financial Help Available

What if you qualify to receive free money to pay off your debts? There are many programs designed to relieve people from their student loan debts.

Student loan forgiveness programs, for example, can offer total or partial repayment of your loans, based on need or career path.

Another option is to look for a job that offers student loan repayment as an employee benefit. Many companies have been offering this benefit as a way to make a positive impact on an employee’s personal wellness while contributing to the country’s economy.

4. Have a Side Hustle for Extra Income

Do not underestimate the power of the side hustle. In the previous examples, two of the people used side hustles to earn extra money. Donovan sold clothes on eBay for extra cash, and Epperson began working as a substitute teacher.

Ultimately, you have to either spend less or earn more if you want to pay off your debts. A side hustle allows you to earn extra cash without having to take on another full-time job. Take a look at your hobbies and skills to determine which side hustle is right for you. If you have a talent for making crafts, you could try selling items online or at your local farmer's market.

If you do not have time to create items to sell, you could always sell the things you already have. Go through all of your belongings and get rid of anything you do not need. All of these unnecessary items can be sold online or at consignment shops. Then, the extra cash can be used to pay off your debts.

5. Stay Focused and Cut Expenses

If you want to achieve financial freedom, you have to be relentless about paying off all of your debts. List all of your current expenses and carefully review them. In most cases, you will be able to find at least a few different ways to save money. For example, instead of shopping for new clothes, head to a thrift store or redesign some of the clothes you already have.

There are a lot of ways you can get creative with saving money. Rather than pay for concerts, restaurants or movies, you could go on a picnic, take a hike or head to the library. Get your friends involved in your plans by having a black-tie dinner or movie night at home instead of heading to a fancy restaurant or theater.

It only takes one unplanned shopping spree to derail all of your budgeting. You have to be focused if you want to achieve your goals. If you have a tendency to overspend, make sure to toss out your credit cards and stick to cash. With a cash-only budget, you are forced to stop spending once you run out of money.

The Bottom Line

You have the power to achieve your dreams. No matter what you want out of life, achieving financial health is an important first step. Once you have reached the end of your debt-free journey, you can work on buying a house, traveling or any other dream without your financial burdens holding you back.

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