The rich ruleth over the poor, and the borrower is servant to the lender.
If you are in debt, you are probably going through one of the most stressful times of your life. Once you borrow money understand that you are the lender’s slave and the owed debt will lead to low credit score, higher interest rates, anxiety, and depression.
You are also likely to feel lonely, trapped, and hopeless. To become debt-free, you need to educate yourself and stick to certain rules to build a healthy financial future.
Here are certain practices that you need to follow to get out of debt and stay out of it.
- Stop acquiring new debt—Do not get any deeper into debt. Use the credit card only for important purchases and emergencies. Live with just one credit card with the most favorable terms and cut the rest up. It will be better if you refrain from using credit.
- Settle the balance on the credit card with the highest interest rate—Doing this will help you take the next step of moving the balances on cards with higher interest rates to those with lower interest rates. Later dispose of all the credit cards and stick with one.
- Record and categorize your spending—List all your bills for each month and write the details of every transaction. This will help you stay within your budget guidelines. Categorize your spending into groups such as ‘Necessities,’ ‘Essentials,’ and ‘Non-Essentials.’ Necessities are things that you must have. Essentials are items you need, but you can do without for a while. Non-Essentials are things that you do not need, but that improves your lifestyle. Budget a specific amount of money to pay toward debt each month.
- Establish an emergency fund—This will help you cope with unexpected expenses and also enable you to stay out of credit card debt. It is necessary to keep at least 3 to 6 months’ worth of expenses dedicated to emergency savings. This must be enough to cover expenses such as food, rent, bills, and other essentials for your daily life.
- Start paying off your debts—Use your savings to pay off debt. Paying an interest rate of around 16-19 percent on your credit card makes no sense.
- Increase your earning opportunities—Find a part-time job or sell that painting in your storeroom. Explore a way to increase your income.
- Begin investing—Once you are out of debt, do not alter your lifestyle. Start investing with the help of a trusted financial advisor.
Getting out of debt will surely give you an ecstatic feeling, positively liberating. Experience it!
Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law.Romans 13:8