Finding your way towards credit card debt freedom – or any type of debt for that matter is no easy feat. When you are trying to get out of debt, you will be bombarded with temptations left and right that will put you off track of what you are trying to do. Regardless of the debt relief program that you will use, it is all the same – you have to make sacrifices just to get debt freedom.
By itself, debt relief is hard to complete but if you have the right attitude about it, you will succeed. But that is not the sole factor that will help you achieve debt freedom. You need to incorporate every ingredient that will mold you to be the person that can stay away from debt by choice and sheer willpower.
Unfortunately, consumers are too focused on paying off their debt that they fail to look at the whole picture. They concentrate on getting out of debt that they fail to work on developing the right habits that will help them stay out of debt. You have to understand that true debt freedom has two phases – getting out of debt and staying out of it. That is what we will try to help you achieve.
Assuming that you have already chosen the debt relief program that you will use, let us concentrate on two important ingredients that will complete your debt freedom.
The role of financial management as a debt solution
The first is financial management. Some people will not agree but by itself, financial management is a debt relief program already. Author of Rich Dad, Poor Dad, Robert Kiyosaki is quoted saying that “money doesn’t make you rich, it’s your habits that make you rich.” The successful businessman is also quoted to say that “it’s not about money, it’s really about financial management and good habits and also financial literacy.”
Not only will financial management help you get debt relief, it will also allow you to grow your wealth in ways that you could never imagine. But all of it starts with your learning to control where your money will go.
Unfortunately, American consumers are far from being considered as good financial managers of their money. According to a questionnaire that LIMRA released to 2,000 consumers, very few of them score an A when it comes to financial literacy. If they know nothing about it, how can they hope to manage their money? The results published on LIMRA.com revealed that one out of eight got at least nine questions correct (out of ten questions). That being said, 27% are considered financially literate. 21% ranked very low, only getting 4 or fewer questions correct.
You want to make sure that you will not be part of this statistic. There are many concepts that you have to learn but the most important are these three:
Budgeting. Creating a budget plan and implementing it in your life is one of the most effective ways for you to control your money and keep you from making a mistake. It will show you the general picture of your income and expenses. By looking at your income and how it relates to your expenses, you can make the necessary adjustments to ensure that the former can cover the priorities of the latter. Since you are going through debt relief, your priority will be your debt payments. Through your budget, you can shift your other expenses so you can make way for this important expense.
Saving. The next financial management concept that you need to implement is saving. At first, you want to concentrate on growing your emergency fund. There are many reasons why you should start saving now – even as you are going through debt relief. An emergency fund can keep you from missing out on your debt payments despite an unexpected expense. And best of all, it can keep you from putting yourself further in debt after an emergency expense.
Smart spending. Lastly, you want to learn how to make the right choices when you are trying to make a purchase. Even the smallest of your expense has to be thought out before you proceed. It is important that you do not only choose to buy because you cannot afford it. The best manifestation of smart spending is when you can afford but you chose not to because you’d rather put it in your savings or add the amount to your debt payments.
These three financial management skills will really help you make debt relief a lot easier. But if you think that is all you need to learn, there is another key ingredient that you may have to work on.
How increasing your income will expedite debt freedom
Growing your income during debt relief is also an important part of achieving debt freedom. When you are in debt, that simply means your income is not enough to pay for the expenses that you want to make. If you created your budget plan, you will recognize the expenses that you can live without. If you decide to proceed, you will realize that you can only cut back on so much amount. If that is not enough to pay off your debt, then you may want to increase your income.
Although this means you have to exert more effort into work, it has its obvious rewards. Here are some of them.
You can grow your income as much as you want to. Unlike cutting back on costs, there is no limit – at least, until your body can handle it. As long as your physical and mental self can work, then you can expect to grow your income further.
You can keep yourself busy enough to avoid spending your money. Too much time on your hands usually ends in you spending more. You want to avoid this by just keeping yourself busy all the time. Instead of spending, you are earning and that is a great way to grow your debt payment fund.
You are able to feel how hard it is to get out of debt. Exerting an effort on something will make it more valuable to you. The fact that you are forced to work harder than the usual will make it more likely that the lessons of debt will stick to you. Since you experienced the hardship, you will be discouraged to put yourself in debt again.
You can opt to continue working even after debt relief. Once you have paid your last debt, you can continue earning more so you can now work on growing your money. Instead of it making your creditor rich, you will not be making yourself rich by increasing your personal net worth.
Increasing your income is a proven way to make your debt freedom come a lot faster. A popular blog site NoMoreHarvardDebt.com can attest to this. The creator of the blog, Joe Mihalic, started the blog to document how he gets out of debt. In one of his articles, he mentioned how looking for ways to increase his income helped him pay off $90,000 worth of student loans. That included cutting back on expenses, selling off the stuff he had lying around, etc.
There are other ways for your to get out of debt and that includes getting a second job, creating a passive income business or using your hobby to create products that you can sell. Try to use something that you know will allow you to still enjoy your life and will keep you from feeling burnt out.
Make sure you include these two ingredients (financial management and increasing your income) while you are going through debt relief. That way, debt freedom will be more certain to take place.