How to Pay Off Debt

“The rich rule over the poor, and the borrower is a slave to the lender”. – Proverbs 22:7. Getting out of this debt slavery is not easy, but it starts by taking actions. Actions that will set you in the journey of financial freedom.

Below are 8 simple strategies to help you in achieving your freedom;

1. Organize your Finances

A good plan usually starts by seeing where you stand at the moment, then visualize where you want to be in the next few years, in this case is financial freedom. Come up with a plan to pay off all your debts. Visualizing will assist you in knowing your current state and an insight of how to approach and achieve your goal.

2. Create a plan for your money

This can start by having a monthly budget which you will stick to. A plan will always be like a road in which you will be using in handling your money, without a plan, the money will create its own plan. Look for money management apps that will help you to keep track of your money spending habits. Remember successful businesses usually create a budget that they go by to achieve their different set goals.

Having a budget is simply because money will never be enough, but having a plan that cap the extent to which you use your money on different expenses will enable you to identify the key and important areas to focus on.

3. Pick a Debt Payoff Method

There are many strategies of paying off your debt, its important to choose the method that works the easiest and manageable. Look into your debts, whether is student loan (HELB), credit card debt, consumer debt, loans from commercial banks or other lenders, see into them and choose which payoff debt method suits you.

There are two well known methods;

  1. Avalanche Method
    • Arrange your debts from the highest interest rate to lowest (ignore the remaining balance).
    • Make the minimum payment on all debts except the one with the highest interest rate.
    • With all you have focus the highest interest rate debt with everything you have.
    • After you pay off your highest-interest debt.
    • With the same energy roll it into the next highest interest debt on the list.
    • Repeat this method until you cross off the very last debt. 
  2. Snowball Method
    • Arrange your debts from the smallest to largest remaining balances (Ignore interest rates).
    • Make the minimum payment on all debts except the smallest one.
    • Pay the smallest one with everything you have.
    • After you pay off the smallest debt.
    • With the same energy roll it into the next lowest remaining balance debt.
    • Repeat this method until you cross off the very last debt.

4. Set Realistic Goals

Realistic means, looking into your finances, how your income flows and the level of your income. Your day to day expenses and the number of debts you have. Look into your debt remaining balance and their interests.

5. Cut your Costs

We spend our income majorly on this three categories:

  • Housing 
  • Transportation
  • Food

Mainly they take up to 70% of our income. Look into them and see where you can adjust so that you focus on paying off your debt. Cutting cost does not necessarily mean living cheap, rather is finding the best value for your money. Check ways to save money from your current expenses.

6. Increase your Income

Sometimes with your current income its hard to manage your debts. That’s why is important to search or think on other ways you can create other incomes. Diversifying your source of oncome will allow you to easily clear off your debt.

You can do this by starting your own business or by simply doing what you are passionate about and adds to your pocket.

7. Stick to your Plan

With a great and perfect strategies, there will be tones of challenges that you will face in your journey.  This is why it’s so important to have an emergency fund set up so you can easily handle unforeseen expenses. The important of having an emergency fund to be flexible and keeping your eye on the prize.

8. Celebrate Your Wins

Whether it’s making your first debt payment or your last you need to be celebrating all your wins. Celebrating your wins is one way of motivating yourself and to encourage you in taking the next big step knowing it is possible.

In conclusion

Living in debt should not be the norm! You should not be a slave to your lenders. This is the freedom that we all want.

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