Life in debt is something most families experience, but there’s a way to finally get out of debt and enjoy financial independence. Even if you have debt on a low income, there are strategies you can employ and habits that would get you out of debt.
Personal finance habits to get you out of debt
Just as with any habits, financial habits need to be changed slowly and kept long term. Otherwise, in under 2-3 months, you’re back to your old spendy self and deeper into debt than before.
Ditch any costly habits
Smoking, drinking and any similar habits are taking a huge toll on your wallet each month. Some people lose half of their income on cigarettes or beer, for instance, not mentioning drugs, which I hope you already stay away from 🙂
The moment you cut of your spending with these useless and costly vices, you’ll free up a lot of money each month, which you can now put towards your debt payment.
Prioritize logically and don’t let your personal feelings come in between
When it comes to debt payment, there are already 2 ways to tackle it: pay of smaller balance debt first, to give you a quick win and make you feel better (debt snowball), or tackle high interest debt, since it’s the debt costing you the most.
Money should be dealt with clear headed and not with passion. This is why mental accounting makes us lose money on a daily basis. Don’t pay of the debt that makes you feel better, pay of what matters more, financially speaking.
Pay of the debt with the biggest interest rate and then move onto the other types. You’ll save thousands of dollars this way and get out of debt faster.
Create an emergency fund and don’t squander it for useless junk
Car breaks. You get a costly medical bill. Kiddo needs new expensive winter shoes. If you don’t have an emergency fund, when in debt, you’re toast. And no, your credit card is not an emergency fund.
A new sale at Kohl’s is not an emergency. Nor anything that doesn’t really bring in any value for your family.
When in debt, steer away from useless purchases and, most importantly, be prepared to meet any unpleasant emergencies with your savings.
Even $1000 saved can cover a lot of these unlucky events, leaving you financially strong and ready to tackle that debt.
Even if you hate it, keep on budgeting
Keeping track of your expenses and making calculations on your future income is a sure way to get back on the saddle, when it comes to your family’s money. It’s still a daunting task and you can easily waste a lot of hours doing so.
Since my billable hours are not cheap, I decided to ditch the too time-consuming expense tracking and be more selective about it.
I do budget carefully though – here is how.
This allows us to still get a good look on our financial performance each month and not waste too much time doing so.
Whatever your budgeting method is, keep on using it and budget every month. In short time you’ll get some excellent intel on your spending and earning potential, making it easier to pay off your loans faster and save more money for retirement.
The 4 personal finance habits, once made to work, should help you become debt free faster and become yet another debt payment success story.