Your debts will never let you live in peace. Majority of consumers in our country can’t lift their head up from the debt mess!
It is time we should do something about it! Else not only us, but also our country, will suffer another financial crisis pretty soon.
This post is designed to help you recuperate from all the debt related problems you have suffered till date! So gear up, and see how you can live your debt free dream, forget the past, and focus on what comes next!
Why is it important to leave behind the past, clear all liabilities and breathe freedom?
You can do nothing by crying over spilled milk. You should be practical and stop thinking about your mistakes. Especially when it comes to debts, the more you think about what you could have done; you miss your opportunities of doing something now.
So what’s gone is gone, you should now focus on how you can pay off your debts, be debt free, and plan a financially successful future!
It’s one life you have got, the more you waste it on regrets and past, the little is left for the present and the future!
I am giving you the very basic idea. You will have to clear your debts first. Then your next step will be taking care of your savings and investments.
So without any further ado let’s see how to get you back on your feet, once again financially!
How to clear your debts? Various suitable methods and how to apply them:
Actually, there are many ways you can be debt free. But the whole thing depends on how much debt you have in total. And what type of debts you have.
Also, you should take care of your credit score while you are on the debt-clearing escapade. So choose the methods that suit you the best.
You have debt consolidation, debt settlement, personal repayment plans and obviously the last resort called bankruptcy.
But no matter whatever you choose it should act as the one and only move that will wipe your debts.
For unsecured debts and revolving credits:
Unsecured debts are those that don’t have any collateral attached to them. They fall under the category of consumer debts and are actually pretty easy to handle. Examples are credit cards, personal loans, payday loans, and any other loans or credits that have no backed up security.
I always suggest that with these type of debts, it’s better to stick onto debt consolidation and debt settlement.
How will debt consolidation help you to clear your debts?
As the name goes, this debt relief option will bring all your debts together into one single place and help you deal with only one single monthly payment.
If you approach a consolidation company, then they are going to help you consolidate your debts, and provide you with a nice and decent payment plan.
All you will do is pay the consolidation company a fixed monthly amount, and the company will, in turn, disburse the amount to all your creditors.
If everything goes well, it’s even possible to save a good amount on your debt payments. You can use the online debt payoff calculator and see how much money you can save.
How will debt settlement clear your debts?
In plain words, the settlement will reduce your overall debt amounts up to a great extent. It’s tough to use this method on your own. It’s better if you take help of a settlement company.
The company will talk to your creditors and will negotiate your account balances. A lump sum amount will be proposed, and if you are lucky you will be able to settle your debts with pennies on dollars.
For secured debts like mortgage, car loan and all:
These loans are really tough to deal with. Normal consolidation and settlement procedures are not possible, as it has collateral attached!
If you don’t pay off the balance then the lender will take away the property from you and get the loan amount reimbursed!
Hence in such cases, it’s better to talk to your lender straight away.
Go for a loan modification, or loan refinance and see if it can help you with such debts. In modification, you will adjust the loan terms and rates. Whereas in refinance you will pay off your existing loan balance by taking out another loan at the current market rates which are typically lower than your existing one.
What about Student loans?
I won’t be talking much about student loans as this is a different topic altogether! If you have a federal loan then see what student loan payoff option you have.
Other methods to be debt free:
You can use a personal debt payoff plan and follow a budgeting strategy. I propose you the zero-based budgeting.
Every month you keep aside a certain amount for your debt payments and then go on with your other expenses.
The motto of this budgeting is to bring your income minus your total expenses to zero.
So don’t stop assigning your dollars a fixed purpose until and unless your Salary – Expenses = 0.
Plan the future and focus on the next:
Once you are done with your debt liabilities it is now time to plan for a financially successful future.
You should start doing savings and go for fruitful investments.
Also take seriously your retirement accounts. They will be with you in your last days of life.
So every month from your paycheck dedicate a minimum of 20% to savings.
“Eventually the more the better”
But only building savings won’t be enough. You should also not incur more debts in the future. Mend your spending habits and understand the difference between your needs and wants.
Use credits sensibly and always try to maintain a good credit score. Having a good credit portfolio is as much important as having a well-diversified investment portfolio.
So here’s the end-note summarization:
- Continue to maintain a budget even if you have cleared your debts.
- Use credit cards only when it’s necessary. Its better you use them only for emergency purposes.
- Stay fit and healthy to avoid medical debts.
- Get yourself insured, and stay protected financially in times of unfortunate events.
- Never hesitate to go for a financial therapy, or financial counseling, as it will really help you to understand which parts of your finances need improvement.
That’s all, hope you are now smart and will do all it takes for financial freedom, and the peace of the mind!