It is a hard truth that many Americans are in a “not-so-pleasant” financial situation. Most of them actually have more credit card debts than money in their emergency savings accounts. In a nation where you can have almost everything with just a swipe of a card, is it still possible to be debt-free?
Financial advisers sulk over the fact that many individuals do not have enough savings. There is an estimated 69% of U.S adults with less than $1000 savings in their accounts. 34% of the Americans have zero savings at all. Now, that is very alarming!
45 percent of those who are in debt spend as much as half of their monthly income to pay off their debts. While it is great that people are paying their borrowed money, it would be so much better off if they’d be debt-free!
To the 14 percent of those who have debts and believe that they’ll be in debt for the rest of their lives, here are five tips on how you can live a debt-free life.
- Always pay minimum monthly payments.
Higher interests and late fees can come haunting you when you forget to make minimum payments on every debt you have. Also, you have to make sure that you do these payments on time.
If you already have a number of debts. Start putting more money on the one with the highest interest while paying the minimum on the rest of your debts. Once you’ve paid that one off, move to the next highest interest until you pay off every single debt you have.
- Increase your income or liquid cash.
Do you have long periods of free time every day? Maximize this time to take new jobs.
If you’ve already tried cutting expenses and looking over every area where you can save some money, you might have to try to increase your income. It can be tiring to have more than one job, but a bigger income may help you pay off your debts faster. Think about it as a temporary set up until you’re clear of your debts.
You should then use the salary from this second job to supplement the payments you need to do each month.
>>Ask an expert about how you can use your home equity to pay debts.>>
- Pay a little extra.
If you didn’t get yourself into any “prepayment penalty” agreement, paying a little extra each month will make you debt-free faster! Of course, you start putting in this extra money on the debt with the highest interest rate moving down the ladder.
- Make sure you have an emergency fund.
Emergencies can happen anytime. And when this time comes, you may end up using your credit card to pay some unexpected costs.
Having an emergency savings account with at least $1000 will works as a buffer in case something unplanned comes up. If your car breaks down or you’re put in an urgent medical situation, this fund can help you cover the loss.
- Consolidate your debts.
If multiple debts give you a headache, try consolidating them. One way to do this is to get a personal loan to pay off the principal and interest on all or most of your debts. Although a personal loan is still borrowed money, it will consolidate your debts into one loan with one interest rate and principal to pay off.
Instead of going through the trouble of paying each debt individually, a personal loan allows you to focus on only one payment per month.
There are plenty other ways to be debt-free. The five tips above can be a great place to start. Remember that when you have lesser debts, you’ll have more money to put on your savings.
To be financially stable, there should be a healthy balance between your debts and savings. If it is possible to be free of any debt, so much the better.
>>consolidate your debts with a personal loan, ask a lender about it.>>