How to Be Debt Free


Success in any activity starts with a plan. Becoming debt free will require a well devised plan, commitment to follow the plan and discipline to say no when the purchase is outside of the plan.

The following seven steps are a guide to help you become debt free:

Step One - Pray. Ask the Lord to guide your steps towards financial peace.

Step Two - Devise a written plan. Create a plan based on current spending; however; the new budget should reflect the changes you are willing to make, such as, an increase income or a reduction is expenses.

Step Three - Complete a personal balance sheet. This will enable to you to list your assets, liabilities, and net worth. A balance sheet gives you a snapshot of your financial strength. You will get a better understanding of your assets and liabilities.

Step Four - Establish a debt schedule and repayment plan. From your balance sheet take the debts and list them as amount owed, monthly payment, and remaining payments if a loan.

You now have what you need to establish a debt repayment plan. Each lender should be listed from smallest to largest debt. Your home mortgage should be listed separately.

Once you have established the dollar figure required for the monthly payments, which needs to be more than you are currently paying; you can start your debt snowball.

Your debt snowball works as follows:

  Amount Owed Payment
Debt 1 250 50
Debt 2 500 75
Debt 3 750 100

You have decided to pay $400 per month for the debt payments 2, 3, & 4 which should be made as listed, 75, 100, and 100 respectively, therefore leaving $125 for debt #1. After month one your remaining balance is $125.

During month two you will make payments to 2, 3, &4 as listed however the payment of $125 will pay off debt #1.

For month three you will make payment 3 & 4 as listed; but, you will pay the payment of $75 plus the payment of $125 and so on until all debts are paid off.

Step Five - Increase your cash-flow. Consider way to increase your income through working overtime, part time jobs, etc. Also consider the question: What do I have that I can sell?

Keep in mind that you are establishing a short term and long term plan.

Working extra hours now will speed up the process and make becoming debt free easier. Early success also builds confidence to stick to your plan.

Step Six - Accumulate no new debt! Cut up your credit cards. Debit cards can still be used every place that a credit card is accepted. There is no additional risk in using your debit card. As an added bonus to using debit cards, you will only spend what you have in the bank.

In addition, if you need to replace a vehicle; pay cash for a less expensive car.

Step Seven - Find satisfaction in what you have. Be content to live more modestly now, so you can live like you want to later in life. Do not listen to the television, radio, or anything that tells you that you need this new product. The more you watch commercials or look at catalogues; the stronger your desire will be to purchase unneeded items. Measure your desires by wants versus needs. If you do not need it and it is not in your budget…DO NOT BUY IT!

A successful budget requires discipline. If you plan to become debt free you must have a good working budget. Are you prepared to make lifestyle changes? Your successes will be determined by your decision to make changes. Are you willing to increase your income, decrease expenses, and say no to products or entertainment that is not in your budget?

The key to success is based on your desire to succeed, your willingness to make the required lifestyle changes and the dedication and perseverance to see your plan to fruition.

You too can enjoy the financial peace of being debt free!

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