How to Be Debt Free

Are you in debt? Do you want to be debt free? Do you think that being debt free is getting to be too hard for you or is impossible? Well, maybe this guide will help you.

Instructions

Difficulty: Easy

Things You’ll Need:

• Cash flow
• A new way of budgeting, spending and most importantly; living

1. # Assess your problems. If you are in debt, figure out how much money you owe. Who do you owe it to? Is it the bank, a car dealership, or simply a friend that you lost a bet to? If it is just $0-100.00's look for a job to work and as soon as you get your paycheck, pay-up your debts. If it is a little bit more, keep working until you have worked it all off. If you need more than a few hundred dollars, you can either work it off, go to step two, or both!
2. # Change your behavior. If your debt is a result of overspending (for example, you buy mass quantities of everything and/or buy things that you want, but are not necessary for living), do some budget planning. Get a friend who can save and doesn't have the spending habit. Bring him/her along when you need to purchase something. That person will be able to provide some advice to you.
3. # Itemize your highest interest debts (generally credit cards, then car payment, then mortgage, etc.) and make minimal payments on everything but your HIGHEST INTEREST debt. This is called "Laddering". Alternately, you can use a "Reverse Laddering" approach, where you pay your bill with the lowest balance first, then the next lowest balance, and so on. This frees up more cash in hand to start chipping down the higher balance debts you have. This method is effective because instead of paying small chunks of money toward those high interest bills, you can throw large chunks of money at them, reducing the amount of time needed to pay them off. Also, your attitude will be better because you see the results of your progress faster, and therefore aren't discouraged as easily. You must be careful though, because sometimes the money you pay on the higher interest is more than the money you free up each month when paying off the small balances. Review your finances thoroughly, crunch the numbers, and see which method would be the most effective for your situation.
4. # After debt 1 is paid off, put the payment amount that you used to get it paid off in record time into the next highest interest debt, and so on. The new extra money that you put forth into the next debts is called your accelerator margin and you continually build it. Those of you who own Transforming Debt into Wealth know exactly what I mean. You are compounding the money that you are using to pay off your debts. These two steps are IT in a nutshell...except it assumes you have some cash flow.
   
   * most people try to live beyond their means to temporarily improve their quality of life. This only makes things infinitely more difficult in the future, and impossible to overcome in older age.
5. # Prevent debt. Every paycheck, put aside some money for bills, food, and other needed necessities of living, and some money aside to save. Also put aside a little money for non-necessities; it is important to be able to to buy things you want without going into debt. Keep saving money, and paying off bills so that you can pay off your debt.

Tips & Warnings

• Do some budget planning. Plan how you will spend your paycheck
• Don't buy something just because you really want it. Buy only things you need.
• Spend as little money as possible.
• Take up a hobby that involves no money-spending.
• Try to save gas money by walking, biking, skateboarding, etc. wherever you need to.
• Avoid using credit cards! Seriously! The easiest way to avoid debt is never, never charge anything on a credit card. If you absolutely think that you need a credit card (to "help" get a good credit score) use the credit card only for purchases that you can pay off at the time you use the credit card. Pay off your credit card bill completely when it's due. Don't leave anything to accrue interest and definitely don't delay for late payment charges, those are just extra expenses. This way you will earn a good credit score without taking on more debt.
• Do Not! fall into the illusion that living a more show-off life NOW in young years will improve your quality of life and friends. No one cares what you own, and if they do, they themselves are insecure. If you want to have nice things, make sure they're for convenience and you can pay cash for them.