One of the most frequently asked questions in the world of personal finance are ‘How do I get out of debt?’ Taking control of your money and your life is something that you have to do on your own. An increasingly large number of families and individuals in the US are drowning in a sea of debt and are desperately looking for ways to pull them out of the vicious cycle of debt. Credit cards are the root cause of all financial problems in the US and so you should shun your credit cards in order to lead a financially free life. If you want to tackle your debt on your own, you should know the reasons that lead you to this plight. Here are some personal finance management techniques that you can adopt in order to live a debt free life.
- Put down your debt on pen and paper: The foremost step that you require taking is to pen down the total debt amount that you owe so that you may know where you stand financially. Distinguish between the total principal amount that you owe, the interest rates that you owe and the due dates on which you’re supposed to repay your debts.
- Save money rigorously: The financial analysts say that there’s no substitute to saving money and therefore you should save at least 10% of what you earn in a month. Unless you save money, you can’t build your emergency fund from which you can withdraw money during urgent situations.
- Invest your dollars: When in debt, investment can add to your passive income and boost your total gross income. You can invest in the stock market or the mutual funds or in the Forex market too. But make sure that you don’t invest all your eggs in the same basket as without diversification, you can never make profits. Diversify so as to continue earning money when some of the other assets aren’t reaping better profits.
- Check your auto insurance coverage: It is most obvious that you have an auto insurance policy and when you’re in debt, you should check the policy coverage so that you don’t pay premiums for coverage that you can do without. In case your vehicle is usually garaged for most of the time, you can cancel your comprehensive car insurance coverage so as to help yourself save your dollars.
- Negotiate with your creditors: Don’t refrain from seeking help of the creditors as they can help you during your financial stress. Tell them the financial hardship that you’re going through so that they might put you on a hardship plan through which you can facilitate your debt repayment schedule.
So, when you’re drowning in a sea of high interest debt, you might take the steps mentioned above. Lock in your credit cards at home and shun the idea of borrowing money to pay off your obligations as this is nothing but playing-fire-with-fire approach towards debt repayment. Adopt a financially healthy life to live debt free.