Who wants to be in debt and live a stressful life? Nobody actually, but a person needs and wishes sometimes slowly moves them into getting entangled to debt, which without a strategical plan gets tougher to get out from. Living debt free life, sometimes feels to be far from reality.
But here we have shared with you some practical experimented ways, which will guide you to lead a debt free life with family called as “6 Tips to master the art of Debt free life”. These include not living beyond their means, ensuring that 20 % of their annual income goes directly to savings, and not using savings under any circumstances unless something meets the emergency criteria.
Control on regular expenses
Some finance expert rules for monthly budgeting says: 50/30/20 for debt free life. Use 50% of your monthly income for regular expenses, 30% for nonessentials and 20% for savings. Keep 20% savings as minimum freezed percentile of your monthly salary.
Start to track your regular expenses on monthly or weekly basis – Monthly bills and expenditure like utilities, health care, car payments, groceries etc, make a list and look for things which are essentials or mandatory for your household.
Cut out Non- Essential expenses
These are those items through which we tend to fulfil our wants/wishes . These are not our regular purchase item, but is brought knowingly – unknowingly as rewards, luxury, display etc.
To identify our present needs, before buying we can ask below questions to ourselves;
- Do I really need this right now?
- Will I be able to keep on going, if I don’t buy this?
- Will I be having enough money after I buy this?
Try it out !! You will realize getting all your answers , which are enough for a person to understand monthly or yearly needs for monthly cut off or budgeting and debt free life.
Emergency Fund Time on
An emergency fund is something which will help you with money when your monthly budget falls short to tackle unexpected financial curve balls that life throws at you. It’s money or fund set aside for unexpected expenses like medical bills or missed paychecks due to a job loss. Any diversion from the regular, routine daily life, which causes a sudden big expenditure, not included in our normal budget, qualifies as an emergency. This could be major car fixes, a sudden change of job, some other financial losses or even unemployment.
Emergency Fund is more preferable than credit cards as you can avoid interest, and because it’s a separate fund, you won’t have to dip into your other savings. Neither will have to talk any sudden loan, helping you to lead debt free life.
Three months’ worth of regular expenses as Emergency fund is a good rule of thumb to keep. You are not required to fund it all at once but can be made up in small steps by saving strategically. This is one of the most important step among 6 Tips to Master the art of Debt free life
Plan cash windfall
A sudden cash windfall, is receiving considerable amount of hike, side incomes, bonus etc. Plan and ensure it adding it to your savings, instead of raising your monthly budget and not on some other non essential expenditure.
In a savings account, the extra cash ultimately helps to grow and earn interest, helping you achieve your next milestone. The magic of compounding, will help you earn more with passing years, moving towards debt free life.
Plan Paying Card debt if any
Planning of paying Card debt is one of the most important step towards debt-free life. The two most popular strategies for clearing debt payments are “snowball” and “avalanche. In our 6 Tips to Master the art of Debt free life, this is the one where you observe changes at faster pace towards debt free life.
Snowball Method – Here you can target the card with the lowest balance, one after another. This helps to pay off card bills faster, and then use the minimum payments from cleared cards to increase the payment on the target cards that follow. These types of strategic approaches are practically beneficial.
Avalanche method– Here you can target the card with the highest interest rates. This not necessarily means to target the the cards with the highest interest rate but can even target the card with low rate but a high payment balance which means the card charging you the most interest every month. This strategy will help you pay less in interest in the long run.
Alternative method: Debt consolidation with a personal loan. Use the loan’s sum and pay off your cards and manage the debt repayment with a loan’s single predictable payment every month. By consolidating your debts, you can manage them all in one place rather than having to deal with five or six different debts. For instance, use a personal line of credit to combine my student and car loans, which will help to save money on interest.
Invest on buying real estate
The best way of long term investment and living dream debt free life is investing on real estates. This is one way of having assured financially stable life. Real state values grows with time, which can be a beneficial step to escape from future burdens.
Debt Statistics
In the second wave, personal loans grew on average by about 12%, compared to about 11% in the first wave (April to September 2020). These personal loans comprised of housing loans, credit card outstanding, education loans, vehicle loans, loans against gold jewelry and consumer durable loans etc. Vehicle Loan and loan against jewelry bounced back at tremendous rate, Housing loan and other persona loans were growing steadily but educational loan got declined since pandemic hit.
Wrapping Up.
No strategy is perfect, but is a guide for improvements and stability. So, its better to have a clarity on your spending, savings to move strategically, because it never too late. Calculate how much you owe, choose a paydown strategy, create and sticking to a budget and formulate a plan to remain debt free and Once you’ve achieved a debt free life you will see dreams turning into reality. Here we have revealed best Top 6 Tips to Master the art of Debt free life just for you all, Try it once and see the changes across.