No one wants to fall themselves as a prey to debt but things and some unforeseen circumstances might force people to go for debts and every person wants to get rid of debts and achieve financial freedom. I don’t say that every debt is bad in contradiction debts can also make things good, for instance a home loan is always suggestible in case if you are going to build/purchase a home for yourself and in addition you will have some tax benefits for availing it (we will discuss about the advantages and disadvantages of debts in detail in future series of articles).
Today in this article I want just want to focus on the best possible ways to get rid of debts. Please note that this post is not a step by step guide or a dummies guide for clearing off the debt but this one is a collection of best possible ways or ideas & advises to follow which have worked for millions of people for clearing off debt. Before you employ these suggestions for your situation I strongly suggest people to set their goals and priorities and then put on the best practices in force for achieving better results.
5 Ways To Follow To Get Rid Of Your Debt & Achieve Financial Freedom
Review Your Current Liabilities & Don’t Add More Debt
Analyze all of your current liabilities and prepare an action plan which you can follow strictly to clear off your debt. After that the first and foremost thing you should start implementing is to stop adding more debt to your profile. Lot of people will take new loans for clearing of the existing debts and some people take new loan for the sole reason of consolidating all of their debt at a single place. I strictly advise people not to do that and just stop taking loans anymore.
On the other hand you can go for loan with less interest rate to clear off loans that attracts higher interest rate, for example if a person named Mr. Arun is having a total loan of Rs. 200000 of which he needs to pay Rs. 60000 to credit card which attracts an interest of 36% and the rest is a personal loan he got from the bank at the rate of 14%, in this case it is advisable for Arun to check the possibility of extending his personal loan to his total liabilities (Rs. 200000) or just take a new personal loan between 12-15% interest rate and clear off the credit card dues as it is attracting a higher premium.
Tip: To be debt free it is always best to get rid of credit cards. It is ok to hold a maximum of 2-3 cards with higher credit limits and that only if you are strict and self disciplined.
Always Spend Less Than You Earn
Spending lesser amount than you earn helps you in saving few bucks. For instance consider Mr. Pavan who is earning Rs. 45000 per month and is spending all of his earnings in the respective month the immediate things that could happen to him is he won’t be left with money to face personal emergencies, left with no money if he loses his job all of a sudden and he will be vulnerable to financial instability and will not be able to clear off his debts (if any), as a contrast if Pavan is using earning only Rs. 30000 for his maintenance and expenses he will be left with a surplus of Rs. 15000 every month which he could invest in any of the savings instruments and could the same amount for clearing off the debts (if any) or use the same amount as corpus for fulfilling his future dreams.
What you should do now? I recommend people to survive with 80% if their income at any point of time (which should also include your savings) and use the remaining 20% of the amount for building a corpus to fulfill his short-term dreams or handle unforeseen circumstances. So ideally if you are earning Rs. 30000 per month learn to live with Rs. 24000 and in Rs. 24000 start saving 40% of that (Rs. 9600) for your future needs (after retirement or children’s education/marriage or any of your long-term goals) and save Rs. 6000 as a personal corpus fund.
Follow a Strict Budget
Just remember that none of the resolutions you make above will not work if you are not following the budget plan you have proposed for yourself. All you need to take care of is it make up a budget plan which is realistic in nature after counting your lifestyle requirements, spending patterns and financial liabilities. Just start working on cutting your expenses especially your spending on credit cards as they not only tends you increasing your expenses with easy availability but also hurt you financially at the time repayment as things may always not be in control when you have freedom to buy things that are higher than your reach/budget.
Always think twice before you spend money on gadgets/fashion accessories/luxuries as the money you spend on these items will only depreciated on use and it is ok to spend a little portion of your earnings on these or for example it is fine to change your smart phone once in every 3 years but always a bad idea to grab a new smart phone very often.
Make Your Intentions Public
Be it to your family member/friend just make your intentions clear, it is best to confess your intentions with someone who are close to you as they will be best one’s in alerting you at times when you are tackling things in a wrong way.
Speak to a Financial Planner
If you follow above all advises with due care and still facing some problem in handling your personal finances then it’s seriously your time to meet personal financial adviser, he/she will be the best one to analyze your expenditure and come up with a plan that works exclusively for you.
Even for others I strongly suggest to spend few bucks for seeking a professional’s advice for handling things at ease. We will only consult doctor for getting treatment not a scientist/engineer for a solution, right? Likewise it is always beneficial to hire an expert who is good in his domain of practice for getting MUCH better results rather than trying to burn out your hands with your own deeds.
‘Prevention is always better than cure’.
Guys, now it’s your turn to share your experiences come up with your own experiences and how you have prepared yourself to handle debts or unforeseen circumstances and you bravely tackled them. Also share your bitter experiences with fellow readers so that they won’t repeat same kind of mistakes and be cautious in handling things.