From Debt To Financial Freedom
What does the journey from debt to financial freedom look like? While everyone’s situation is unique, there is still a core path you can follow toward independence. Here, we’re going to discuss the fundamental steps everyone should take to regain control of their finances.
1. Assess your debt and then create a plan of action.
The first step starts with taking a hard look at your finances. How much debt do you have? Are you able to make more than the monthly minimum payments? Is your income up to the task? Can you handle your debt on your own or is it time to ask for help?
If you expect your financial prospects to improve in the near future, paying the monthly minimum may tide you over until your situation improves. However, if you’re struggling just to make ends meet, there are a number of options to suit every situation:
• Bankruptcy is best suited for those who have a mix of secured and unsecured debt, such as a mortgage, medical bills, auto loans, and credit cards. Bankruptcy provides debtors with an automatic stay, meaning the collections calls and letters are put to a stop. Learn more about bankruptcy here.
• Debt consolidation allows you to take out a single, lower interest loan to pay off all your debts, allowing you to make one monthly payment to pay off multiple creditors.
• Debt settlement or debt negotiation may reduce your interest rate and the actual amount you owe through good old-fashioned haggling. Learn more about the difference between debt consolidation and debt settlement here.
Whichever option you choose, make a plan, including ways to overcome possible obstacles that could prevent you from sticking to your strategy.
2. Create a budget…and stick to it.
Whichever option you choose, you still need to create (and adhere to) a budget. While you’re working your way out of debt, the reality is that you’ll just have to tighten your belt.
List your monthly expenses and separate the essentials from the expendables. Essentials are expenses that cover your basic needs, including housing, food (and, yes, you can still eat healthy on a frugal food budget), utilities, transportation, healthcare, clothing, and personal care items.
Alternatively, expendables are anything you can do without, including entertainment, dining out, the internet (desperate times and all), pricy smartphones, and unnecessary shopping.
3. Just breathe.
Overwhelming debt often exacts an enormous psychological toll. And chronic stress can lead to chronic illnesses, including heart disease, depression, ulcerative colitis, and asthma. So, please, mind your anxiety levels with one of these stress relieving techniques.
4. Focus on improving your credit score.
If you were burdened by massive debt, chances are your credit wasn’t all that great. Certain debt relief options can also have a toll on your credit score – though the pros may outweigh this con. This three-digit number may seem arbitrary, but it can have far-reaching consequences that extend to your ability to obtain low-interest loans, secure living arrangements, or even snag your dream job.
After you’ve completed a debt relief option, you should really start to focus on making wise financial decisions that can boost your credit score, including making your regular monthly payments on time, keeping your credit card balances low, and avoiding opening new lines of credit.
5. Learn from your mistakes, but don’t forget to live your life.
Overwhelming debt is a harsh lesson. But, don’t let the experience of desperate financial times prevent you from leading a fulfilling life once you’ve achieved financial independence. We’re not saying you should buy a brand new Mercedes or fly first class on every vacation. What we are trying to say is that once you’ve paid your debts, you should start budgeting for experiences. We only get one life, so live it.
New Era Debt Solutions specializes in debt settlement or debt negotiations. Since 1999, we have helped our clients settle over $200 million in debt. If you’d like to see if debt settlement is the right first step for you, please contact us or fill out our form on this page for your free debt analysis.
Financial freedom awaits.