3 Steps to Living Debt Free

Getting out of debt can be like climbing a mountain. The bigger the debt, the harder it is to reduce it. This is because of the exorbitant interest rates that are charged on credit cards… on the other hand, if your debt only consists of a mortgage or student loan, you have a better chance of being able to pay it off. But, no matter what type of debt you have, these three steps will start you down the path to debt relief.

The first step  to take in paying off your debt is to consolidate all your debts into one. If you have multiple credit cards that carry balances, mortgage payments, and student loan payments,  you should figure out exactly how much you owe altogether. Once you have a set amount of how much you owe, create a spreadsheet of your monthly income and expenses.  Calculate how much money you have leftover each month after all your expenses are paid off (only including necessary expenses).

Next, you want to come up with a timeline of when your debt should be paid off. If you want to pay off all your debt within one year, divide the total amount you owe by 12. The number you get, is the amount you should be putting towards your debt payments each month. Now, divide the total amount you owe by 365. This number tells you how much you should set aside for debt payments every single day. Make sure the number you get for monthly payments falls within the amount of money you have leftover each month after expenses.

Let’s do an example together. You currently have $15,000 total in debt. You’ve calculated that you have $500 leftover each month after necessary expenses. We begin by dividing $15,000 by 12.  This means you’re going to need to put $1250 towards your debt each month. Unfortunately, you don’t make that much money… so instead of paying off your debt in one year, it will take you a little more than three years to pay off your debt completely. To do this, you’ll have to make payments of $416 each month ($15,000) for the next three years. This comes out to making daily payments of $13 towards your debt.

3 Steps to Living Debt Free 3 Steps to Living Debt Free Reviewed by darkmatticus on January 14, 2019 Rating: 5
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