Meet Chris. Chris is an 18 year old high school graduate who is now starting college. His parents are middle-class folks who cannot afford to send Chris to school, so he has been forced to take out college loans to finance his education. Chris attends a state university and graduates at age 22 with $20,000 of student loans. The only reason his college debts weren’t higher is because he worked hard every summer to offset his college costs.
In that last few years of college, Chris gets a credit card and racks up another $2,000 of debt. Directly after college, Chris lands a great job making $40,000 per year, so he decides to take out a used car loan for $15,000. Now, at age 22, Chris is already nearly $40,000 in debt. Fast forward another 10 years, and Chris has probably accrued more credit card debt and is now about to take on the largest debt of his lifetime—a mortgage.
Chris’ life experience is not incredibly different from most. By the age of 35, most people have significant credit card, college, and mortgage debt. The good news is that no matter how deep of a financial hole someone digs, it is possible to climb out. Obtaining true financial freedom requires a plan, extreme discipline, and consistent execution. Following are 5 tips that can help folks like Chris regain financial control and reach true financial independence.
Reduce Expenses
It’s easy to spend money. We live in a consumer-driven culture, and everywhere we go, we are constantly bombarded with buy opportunities. The first major step toward regaining financial control and paying down debt is to institute a strict budge that governs exactly how much one will spend each month. Expenses must be reduced to only the essentials. The best way to do this is to track all monthly expenses for an entire month. Then, at the end of the month sit down and review them. Eliminate every needless expense. Instead of Starbucks, brew your own coffee before you leave for work. Instead of eating out, eat at home. Instead of going to the movies, rent one! Sacrifices are imperative.
Consolidate Debt
If you are paying high interest rates on credit cards or auto loans, consider consolidating all of your debts through a debt consolidation company. This will often reduce the interest rates and minimum monthly payments. Then, you can use this extra cash flow to pay down on the principal of your debt obligations, which will speed up the time to being debt-free.
Increase Income
The key to being debt free faster is simple—you just need a larger and larger gap each month between income and expenses so that you can direct that extra cash flow toward paying down debts. The simplest way to do that is to reduce expenses and make money. Consider an extra job on the weekends, or pick up a few side-contracts if you have a professional skill set.
No More Debts
This should go without saying, but debt spending must stop immediately. That means no more credit card payments, no matter what. Let the credit card processing companies make their money off other people. No excuses.
Accountability
Making a drastic change to your financial lifestyle won’t be easy. Therefore, it is important to find someone you trust that can act as an accountability partner to make sure you are sticking to your plan and encourage when times are tough.
Regaining financial control is a lifestyle choice. It will require discipline and persistence, but the rewards are well worth the work.
This has been a guest post by Andrew DeLuca from Merchantseek.com
What are you doing to pay down your debt faster?
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