Take a look at your credit cards and outstanding loans. The balances may be overwhelming when you add them all together. Owing substantial amounts of money is never the goal in life, but millions of people deal with debt every day. Try a few tips from Hornet Partners today. Living a debt-free lifestyle takes some effort as you make this transition.
1. Make a Budget
Intuit cautions everyone that making a budget must be a top priority. Knowing what you make and spend is the first step toward being debt free.
Jot down all of your necessities, such as rent, electricity and natural gas. Compare them to your income. Look at what you spend on groceries and other expenditures. The goal is to spend less than you make. It’s preferable to put some money toward savings and pay off debt if necessary.
2. Avoid External Pressures
Pressure from friends, family and even neighbors will lead to debt. Someone in the neighborhood buys a luxury car, and now everyone else feels the need to do the same thing. It’s difficult to avoid this reaction. You can combat this spending fever by recognizing it for what it is: a pressure and nothing else. No one else has your exact budget. Spend money within your comfort zone. It can pay off in the end.
3. Don’t Let Creditors Dictate What You Can Spend
When you apply for a home loan or credit card, the credit provider often gives you a quote on what you can afford to pay as a maximum amount. Don’t let the creditor’s suggestion sway you away from a debt-free lifestyle. You may be able to afford a $500,000 home on paper, but your income would be largely dedicated to that debt.
You definitely need credit, but don’t spend to that maximum amount. Use an amount that you feel comfortable with as you apply it to the household budget. For building credit, try to hover around 1/3 of your credit limit.
4. Use Credit Cards Wisely
Pretend that the credit card is a debit card. You can only spend what you have in the bank. You can live a debt-free lifestyle with this mindset. Avoid those huge expenditures if possible. Saving up for a large purchase, paying it with the credit card and covering the expense with cash when the bill is due creates no interest and better credit ratings.
5. Pay Down Any Debts with High Interest First
When credit-card spending grows out of control, it’s time to tackle it with your new lifestyle. Stop adding more debt to the balances. Mentally consider the cards closed.
Pay down the balances by putting more money on the card with the highest interest rate. You want to get this debt out of the way first. Otherwise, the interest will accrue with alarming speed. Keep up with the other cards by focusing on their minimum payments. When the high-rate card is finally paid off, place your attention on the next expensive card. You can be free of debt with this financial strategy.
6. Consider Debt-Consolidation Loans
If you do end up owing too much in debt, there are options. Achieve a debt-free lifestyle by consolidating balances with a company like Hornet Partners. Credit cards, auto loans and many other debts can be combined into a single monthly payment. This amount is often less than you’d pay with separate accounts. Use the extra money to pay down the debt even faster. Financial professionals can guide the way.
7. Keep up With Insurance Coverage
Debt can add up fast when you don’t have homeowners-, renters-, auto- or health-insurance policies. Everyone gets sick or has bad luck at some point, reasons The Balance. Carry insurance as necessary for your situation. The premiums are often less expensive than paying for a service outright.
If you do experience a loss, you won’t end up in substantial debt. Small bills are the result of an insurance policy in place for many years.
8. Be Honest About Frivolous Purchases
There are a lot of purchases in life that aren’t necessities. They’re downright frivolous. Take a look at last month’s receipts. Look at spending patterns. There’s no reason why you should buy a $5 cup of coffee every day. Brew your coffee at home.
These small changes can make a difference in your budget. Treat yourself to that favorite coffee just once a month.
Ask yourself if you really need an item before you buy it. You might have a dozen shirts, so skip a shopping trip this month. Put that saved money toward current debt or save it for later.
Contact a consolidation company today if you have any questions about debt and removing it from your life. Becoming debt free may seem like a huge challenge, but it’s possible with some help from the professionals. Reduced stress and a happier life are typically the results of your financial frugality.
