There is no way to achieve financial freedom if you are burdened with debt. With proper planning and a bit of patience, though, you can get out from under your debt.
You can’t clear off all your debt overnight even if you enroll debt management plan, and all the while, you accumulate huge interest and late fine penalties.
Here are a few steps that you can take to get back on your feet faster.
Checking your debt to income ratio is the first step toward understanding your financial status and figuring out how much time it takes to be free of debt. If the amount that you owe to various creditors is high in proportion to your income, naturally it takes longer to get rid of debt. But this also depends on how keen you are to get debt free and how much you can afford to reduce on your expenses. The more money you can cut back on your expenses, the more money you free up for paying debt.
Now, scrutinize your monthly inflows and outflows of money. There are probably plenty of expenditures you can avoid. You need to plug these leaks and try to restrain spending as much as possible. Sometimes, we get false impressions about our finances – thinking, for instance, that some expenses are vital when they should be chopped.
Cutting expenses on groceries and utilities can be difficult, but if you buy coupons online and make bulk purchases while food items are on sale, then you bring down a good chunk of your monthly grocery bill.
If you run into a financial emergency, such as the loss of your job, an illness or disability, you may not be able to service your debt. This is why it is so important to keep up with your monthly disability insurance payments. Be careful about paying them so your policy does not lapse. While the premiums might seem like a burden, you can rest assured that you will be safe from having to default in the event of an unseen crisis.
Enrolling in a debt settlement program could reduce your total amount of debt. You might even find a way to pay less than the amount that you owe. Sometimes you can convince a creditor to take less. Be aware, however, that this may also come with tax consequences. Before you jump into a debt settlement program, consult with a financial advisor who can help you choose the best option for your needs.