Are you burdened with debt? Every month you are just paying EMIs going bankrupt and not able to save anything for yourself. Forget about saving you are not even able to spend enough for day-to-day expenses.
If yes then
this article is for you. Today we will talk about a step-by-step road map that
will help you to become debt free quickly and efficiently so are you ready?
Start making your life debt free.
You have to understand your debt
The first step is that you have to understand your debt. What people often do is that they just pay our loan without knowing the details of their loan properly.
They do not even know many times what is the interest
rate of which date and for how much time duration it has been taken? This is a
very wrong thing.
If you do not want to do this then first of all you should
have clear data of everything In front of you so that you can take action
accordingly.
Look taking every loan and liability together what was its
principal amount what is the interest rate and how much are you paying on a
monthly basis write down all these things. If you do it correctly you will get
a clear picture of where you stand and what should be your target? Towards
taking a loan
we always understand it with an example. Let's assume that Sunil has three loans one is a car loan one is a credit card balance and one is a personal loan.
The interest rate of the car loan is 10% that of the credit card
is 30% and that of the personal loan is 15%. Now you tell me where Sunil would
like to focus first?
Yes, Sunil would like to focus on the credit card first and
should think of clearing it first because its interest rate is the highest.
Now after making this Sunil’s plan is clear as to what he
has to do? Now as you have understood the debt now comes the next step.
Repayment means how you will run it you should also make a
strategy for it so I will tell you two popular methods here using which you can
very easily make a strategy for your payment, The first is debt snow ball and second
is debt avalanche
Debt Snow ball and debt Avalanche
Today I was first of all very important to understand the
difference between these two. When it comes to debt snow Ball category here you
have to clear the smallest debt first when it is over then focus on next debt,
let's talk about the
debt avalanche method here the one with more interest has to be cleared first. Yes,
it saves your money better in the long term, but yes patience is very important
in this because it does not give small bills like debt snow ball. In this you
may take some time to clear a debt. That is why we need patience here.
For example, Sunil has two ways to clear his debt. First, he
can clear his credit card debt which has an IT risk rate of 30%. By doing this the
debt will be cleared otherwise, he cannot pay his smallest personal loan which
is a snow-ball.
In both the ways sunil's debt will be reduced. But you will decide the outcome according to your financial and psychological situation. Which one will you choose?
here you have thought of this strategy that how will you pay
your loan? But to implement it practically it is very important to make a
strong budget. Money will not come in hand just by thinking.
If you don't have a proper budget then you should work on
the strategy you have made. Track your income and ex-consumption or write it
separately and observe it well. Now you have to track every single penny.
Have to track every single penny
Then according to you the biggest mistake that people make
nowadays is that according to me there are 24 hours in a day and you can
observe it well now you have to track every single penny.
Until you repay your debt you can spend only on essential
things. So, there is no need to relax and most importantly whatever 20 to 30%
you allocate for your savings and debt repayment first of all you have to take
it out of your pocket and keep it aside.
For example, the income is of Rs. 50000 he will say that he
has to keep Rs. 15000 as debt repayment. And the rest of the money is extra. He
has to cut out as much as possible.
He can avoid all the expenses. He can cook his own food
instead of going to the restaurant and can save a lot of money in this way.
Every small thing has a big impact.
So, after that there is another powerful way to become debt
free and that is to increase your income. See extra income your payment
processor will be accelerated so that now some extra income is coming You can
also replace your expenses.
You can do a part time job
It is very difficult to earn extra. How do I do this? Isn't
this a problem? It is not like that. Think with a cool mind and see you can
work smart along with hard work. You can do a part time job of freelancing
along with your job and business.
You can monetize whatever skills you have. Like public
speaking, web developer, content creator, blogging, affiliate marketing, photography
and video editing, even voice over there are many such skills which you may
know and if you don't know then you can adopt it but first of all you should
have a good command over it. If you should know it well then only you will be
able to earn money from it and yes
if your interest is
making animated videos and you also want to make such videos then I will tell
you. This is very easy and you can earn a lot by making videos in just one
month. You can use animations for making cartoon videos for children. You can
make moral stories and educational stories.
you can learn from there and you can contribute by making a
good animated video and can put your own YouTube channel for free. You can earn
a lot and get out of the traffic. Apart from this I will tell you another way. there
must have been a lot of used things in your house.
You can sell them well you see there are many such things in
all of our houses which we buy to show off but now nothing happens to them.
Sell them in large amounts and whatever money does not come pay it to reduce
your possession.
you will have to control your expenses as well. You will have to do a little to become debt free right? But this security and its result will bring you happiness in the long term. For this
you can reduce weekly dining out subscription services. Temporarily reduce Luxury items. Where your work is being done on a phone worth Rs. 15000 then you do not need to buy an iPhoneright?
Ask your priorities and along with this you can choose budget friendly options. There will be many expenses like public transport carpooling and so on. You can avoid them in your life and save some money.
For example in our family Sunil used to have dinner every
week. Now he makes food at home and saves Rs. 5000 per month and these small
changes make a big difference for Sunil. Think of Rs. 5000 as Rs. 60000 per
year.
Along with this if you request your bank and credit card
company to lower your interest rate then sometimes this also works. If your
credit score is good then you can definitely get a better loan. You don't need
to be afraid of this.
Get some benefit from talking to them
Just talk confidently to the bank and lenders if you can get
some benefit from talking to them then what's the problem if I call your bank
or credit card company and request for a lower interest rate? Also mention
about your payments that you always paid EMI on time he should consider this
thing.
Along with this you should explore the option of balance
transfer. If the interest rate is new here then I reduced the interest rate on
my credit card from 30% to 20%. Due to which the monthly EMI got reduced.
Emergency fund will be a kind of safety net. For your emergency fund you should save at least four to six months of expenses and it will save you from many situations.
Keep this fund in a liquid investment like
a savings account or FD so that whenever you need it you can withdraw it as
quickly as possible.
see self-investment is very important. It is very important
to develop good financial knowledge and skills which will help you to move
forward. So, I hope you have got all the points clear. You have understood
better which points and strategies you have to focus on to get out of this trap.
