Do you want to become debt free? Not only does it have to join the thought, but it requires effort. Here are six steps to becoming debt free!
Think of all the thousands of dollars that go out of your paycheck every single month.
What would your personal finances be like if you only had the mortgage again? Or better yet, what if you got rid of all your debt!
What would you spend your income on then?
Saved and bought new motorcycle cash? traveled much more? donated to organizations? Eaten more out? helped your children financially?
By releasing yourself from all the down and down payments each month, you can focus your income on what YOU want!
Six steps to become debt free
Are you also tired of debt and monthly payments?
An increasing number of Norwegians want to pay down debt. By becoming debt free, you can release monthly all monthly down and down payments and focus your income on what you want, whether it is investment, savings or consumption.
There is no magic recipe for getting your personal finances in order and paying off all debt. Being debt free can be summed up in three short steps:
1. Start with a bad plan
Start with a plan to get started. If your goal is to become debt free, how are you going to achieve it?
Start by writing down some steps you can take and what you can do to get started with being debt free.
Make a plan to increase your income and get lower fixed costs.
2. Have a why
Motivation is important for getting out of debt. Having a “why” makes it easier to endure while focusing energy and effort on paying off debt.
A why is simply a goal you want to reach by becoming debt free. My personal “why” is to go to a motorcycle shop and buy a new motorcycle with cash. For others, the motivation may be to travel more, work less or have more freedom to do what you want.
3. Create a budget
A budget will be your biggest tool for getting your personal finances and consumption under control. Setting up a personal budget can save your monthly savings in a very short time.
By becoming more aware of your consumption, you can use the profits to pay extra down on the debt to reach the goal of becoming debt free.
4. Get rid of debt with the snowball method
The snowball method is based on sorting your debt according to balance and not interest level. This is not the most economically sensible strategy, but it provides great motivation and for many people, the snowball method will be a good strategy for getting out of debt.
For others, it would be wise to refinance all the debt, collect it into one new loan with hopefully better interest rates and thus pay off the debt each month.
5. Have hope!
Have faith and hope that it will be resolved eventually. Keeping the motivation up while focusing on debt repayment, working extra and being extra careful about consumption can be difficult. Especially at first, it may seem like you are fighting in a perpetual downhill battle against debt, but have the hope and belief that you can manage to reverse it.
6. No new debt
Avoid new debt. To be able to become debt free, one must first stop borrowing new loans and credits.
A good idea is to build up a sum of emergency money that you may have available should any unforeseen expenses occur. By having emergency money available you can easily cover any crisis situations that may arise without having to take up new debt.
Also, consider refinancing your debt to get a new and hopefully lower interest rate. Even if you have debt collection or payment note, you can also refinance with a restart loan.
Get a better overview of debt and loans with this free debt overview. Here you can fill in your own figures and follow the development over time.
Why do you want to become debt free?
Having a solid “why” I think is the most important motivation for getting out of debt quickly. It’s not the repayment plan or the tactics that get you debt free, it’s you!
Having someone clear why will stick to the plan you have laid out. This will make it easier to avoid temptations and derailments along the way.
Find your “why” – Make them clear and visual!
- Maybe you want to travel to the US and take a 3-5 week vacation on the road, experience everything and pay everything in cash?
- Maybe you want to go into a motorcycle business and buy a brand new Indian bike cash?
- Maybe you want to help your children financially in the future?
- Maybe you work less – or start your own business?
These are some of my obvious why .. what’s yours?
Refinancing your debt can be a smart choice, especially if you have many small or expensive loans. If you have ongoing debt collection cases with expensive debt collection fees or bad credit, there are still opportunities with a restart loan.