For most people, living a debt-free life is something to aspire to. After all, nobody wants to feel the constant pressure of creditors breathing down their neck. It can be stressful to get angry and threatening phone calls every few days, and it’s stressful to save all of your money just to repay those debts that you owe. In some cases, it might not even be your fault that you’re in debt. Regardless of your situation, aiming for a debt-free life is a noble path and it’s important that you approach it the right way.
In this post, we’re going to cover some important things about debt and what life is like once you’ve reached a state of financial freedom.
Why do people fall into debt
First, let’s ask ourselves an all-important question; why do people end up in debt in the first place? Here are some of the most common reasons.
- Poor budgeting skills. If you’re the type to spend a lot of money on luxuries and be extremely wasteful with your hard-earned money, then you’ve got poor budgeting skills and are at risk of falling into debt. Learn to manage your incoming and outgoing money by creating a budget. Track your expenses and make sure you develop a frugal mindset to help you save money.
- Reduced income due to losing a job or being demoted. Losing your job is never a fun experience. It completely cuts your income and grows your debts even more because you’re unable to make consistent monthly payments. If you are, then you’re probably digging into your savings which is never a good sign.
- Living a life beyond your means. There are many warning signs that show you’re living beyond your means. It could be constant partying, a fear of missing out if you don’t have the latest technology, or even renting out a home that is significantly more expensive than what you can afford.
These are just some of the most common reasons why you might end up in debt. However, it’s not an all-inclusive list and there are many other ways to end up in debt. We highly suggest that you start taking better care of your money and adopting a more frugal approach to life in order to save more.
Taking the first steps to get rid of your debts
So what does it take to start getting out of debt? The simplest way is to just pay off those debts. Going through a long process such as debt consolidate, credit counselling or even bankruptcy can be quite confusing.
However, there are a few more common debt solutions that you might want to consider when getting over your debt problem.
- Debt consolidation – This is a popular option that involves taking out a big loan to pay off all of your other debts, thus consolidating all of your debts into a single repayment. The big advantage to this is that you pay a lower interest rate in total because you’re not repaying interest to multiple lenders. However, you need to be approved for this, so it does take a little time to receive a debt consolidation loan.
- Credit counselling. Credit counselling essentially means getting advice on money and debts. For example, you might be taught how to save more money, how to stop spending your credit, and how to manage your debts with ease. You can learn some great lessons with credit counselling, so it’s usually well worth your time.
- Debt settlement. Debt settlement means wiping a portion of your debt. While it sounds too good to be true, it’s a viable option in some cases if you can show that the lender won’t be able to get much money out of you due to your financial circumstances, employment status and so on.
- Personal bankruptcy. Bankruptcy is a complex process. This essentially wipes out most of your debts but can leave you in a poor financial situation for many years. We suggest speaking to experts such as Leinart Law Firm to help you identify if personal bankruptcy is an option for you. If not, then they’ll be able to offer you other options to help you overcome your debts and live a life free from financial stress.
So you’ve just made it across the finish line and are debt-free, now what?
When you finally make it over the finish line and make your last payment, you might find it a little difficult to grasp what you’ve just achieved. After giving yourself a pat on the back and perhaps treating yourself to something nice, it’s time to continue your streak and focus on staying debt-free.
For starters, continue living a frugal lifestyle to avoid getting into debt again. Stop spending money on things that you don’t really need, cut out any unnecessary subscriptions and look away from luxury purchases that cost far too much money. Say no to excessive spending and make sure you take better care of your money management. Learning to budget for expenses will be a great help as well. You will then have the ability to cover your weekly and monthly costs without the risk of more debt. Make your life easier by comparing supermarket prices, utility costs, and car insurance cover. With regards to the latter, this can include standard insurance or sr22 insurance cover if that is the policy you hold. Use comparison sites for all your expenses and make savings where you can.
You should also watch out for signs that you’re living beyond your means. This relates back to spending money on things that you don’t need. A common area where you might live beyond your means is spending money to appear more wealthy than you are. For example, renting out a house that is more expensive than you can afford, or paying for the latest electronics when you don’t really need them.
It’s also a good idea to learn to put down your credit card and start using your own money. You should never really be using your credit card unless it’s for emergencies. If you’re buying something for yourself, such as a new piece of technology, some kind of video game or even a holiday, make sure it comes out of your own pocket and don’t rely on your sources of credit.
Lastly, learn more about saving your money so that you can avoid falling into debt due to sudden expenses. Whether it’s medical costs, expensive repairs or even family issues, having a pool of savings to fall back on is never a bad idea.
So what can you look forward to after finally clearing your debts?
So what kind of benefits can you expect once you’ve cleared out your debts?
For starters, you finally get to relax. You’ll avoid the emotional effects of debt and you’ll be able to sleep at night without having a looming financial problem in your mind. Also, your money will be yours to spend however you see fit. Of course, we don’t suggest that you spend it nonchalantly. It’s always best to adopt frugal spending practice and to save money, but it’s always a nice feeling knowing that you can spend money without incurring more interest charges and debts.
You’re also going to have a life of financial freedom. This means different things to different people, but the core concepts are the same; you can do whatever you want with your money. This is different to simply spending your money on luxuries whenever you want. Instead, it means having more control over your finances and ultimately your life.
You can also take this opportunity to teach others how to be debt-free. As someone that was previously affected by debt, you’ll likely have lots of different lessons to teach people about how to handle their debts. While you shouldn’t go around preaching to people about how you overcame your debt, it’s never a bad idea to offer some advice to other people.
It’s also a good idea to consider teaching your children about debt and money. This will help to prepare them for their own financial responsibilities in the future, and you can pass down your knowledge and experiences to help better their own financial goals. It’ll help you and your family realize the value of money and it’ll encourage you to save more money in the future.
Lastly, we also can’t forget about your relationships with family and friends. When you first get into debt, it can negatively affect your family dynamic and may lead to constant arguments and misunderstandings. Once you start taking more control over your financial situation, you’ll start to realize that it’s important to communicate when it comes to money troubles.
You’d be surprised at how debt can affect your relationships. Thankfully, you can start mending those relationships once you show others that you’re fully capable of controlling your spending and managing your money correctly. There’ll be fewer arguments, fewer budgeting problems, and it’ll ensure that you can provide for your family without relying on credit and drowning in debt again.
Lastly, we also can’t forget that you can stick it to your creditors and finally get them off your back. That’s perhaps the biggest relief for most people. Being able to laugh at your creditors and show them that you ultimately came out as the better person is plenty of motivation and encouragement to keep your financial situation healthy.
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