The average American household has over $135,000 dollars worth of debt. Given that most of that debt comes with interest and fees, most people’s debt burden is only getting bigger.
Debt can be a massive source of stress and anxiety in the lives of people having to manage it. It can make it so it’s impossible to enjoy everyday life and can ultimately limit one’s ability to do the things they love.
That’s why, if you’re in debt, it’s important to be proactive and do everything in your power to try and work your way out of it.
Therein lies the purpose of this article!
Our team wants to give you some become debt-free inspiration by sharing with you 7 steps that can help you burst out of debt and start living a better life.
1. Change Your Relationship with Money
Most people who are in debt have found themselves in that position due to overspending. The average American spends over $60,000 per year on goods and services.
Many of them only have a fraction of that sitting in their bank accounts.
To help you become debt-free, the first and most important thing we can suggest to you is to change your current relationship with money.
Never spend more money than you have. Start seeing splurges and splurges again. Start thinking of cheaper alternatives to the things you normally do.
For example, eating out for lunch 5 days a week while you’re at work might not seem like you’re spending much. After all, lunch only sets you back about $7.00.
Those small $7.00 purchases though come out to be something much bigger at the end of the year. They come out to be a whopping $1680.00 worth of food spending you could have saved by bringing lunch from home.
So start auditing yourself. Look at the small things that you buy and think about what they equal in costs over time. Then, find ways to cut those costs down.
2. Cut Back on Your Monthly Bills
A low hanging fruit when it comes to getting out of debt is slashing your monthly bills.
If you have cable, drop it and switch to free digital-tuner based TV. If you have an expensive car payment, downgrade or ditch your car altogether and start taking public transit.
A few bill cuts could equal hundreds or even thousands of dollars in monthly savings. All of that money could be put towards paying down your debt.
3. Pay Down Your Highest Interest Rate Debts First
If you have multiple loans, credit accounts, etc. that you’re paying down, start paying them down smarter by prioritizing high-interest debts.
Debts with high-interest are going to balloon the fastest if they’re left open. To prevent them from getting out of control and costing you exorbitant amounts of money, get them off of your books quickly, even if it means just paying the minimums on your lower interest loans.
4. Consider Consolidating Your Debt
Many people get out of their high-interest debts through consolidation. When you consolidate your loans, you take out one loan with favorable terms and use that money to pay off all of your less favorable debt.
Finding a good loan provider to consolidate your debt can take time. We recommend that you do your diligence by comparing interest rates, fees, and lender reviews.
Find out more about online lenders today.
5. Pause Your Retirement Contributions
Many people who are in severe debt still make it a point to contribute to their retirement. While it may seem like they’re doing the right thing by investing in their future, when you consider the 7% – 9% returns on a 401K account and compare that to the 14% – 30+% interest you’re being charged on your debt, it is to your advantage to focus on getting rid of debt before contributing to your retirement.
Remember, pausing retirement contributions is a temporary measure to lean on just until you can get your financial situation in order.
6. Pick Up a Side Hustle
Most of our tips on how to become debt-free so far have focused on ways to save money. Saving all the money in the world might not cut it though if your income is lackluster.
For people in that situation, many turn to picking up a side hustle.
Side hustles can encompass anything from selling goods online to becoming a rideshare operator and beyond.
For inspiration on what side hustles might be a good fit for you, check out this article.
7. File for Bankruptcy
This is the last thing we want to recommend since there are repercussions to bankruptcy (most notably a massive hit to your credit). But, if you’re in severe debt and have no assets, there’s no shame in exercising this option.
If your debt is capable of being resolved by bankruptcy, once you declare it, your slate will be wiped clean. Collections will stop harassing you.
You’ll be able to start building yourself back up again.
Wrapping Up 7 Stress-Free Steps to Become Debt-Free
The pressure caused from being in debt can be crippling for those who are suffering under it. Fortunately, armed with our steps to become debt-free above, there is hope to start clawing your way out of debt and towards the life you’re meant to be living.
So what are you waiting for? Start changing the way you look at money and start saving today.
With a little bit of effort right now, your life could look very different in just a few short months!
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