Category: Debt

Quickest Way To Pay Off Debt!

Today I will be talking you through the quickest way to pay off debt.

Britain is in the midst of a debt crisis. The average UK citizen now owes a whopping £8,000 in debt – and that’s not even including their mortgage payments!

There are millions of people out there who can’t make ends meet, pay off debt and living payday to payday. They worry that a debt-free future will forever remain an impossible dream.

Here’s another shocking statistic: The Financial Conduct Authority reports that 4.1 million UK adults are in financial difficulty.

This means that they are struggling to pay domestic bills and manage their credit repayments.

 

 

Are you swamped in debt?

Are you one of those people sitting on a pile of debt and looking for the fastest way to pay it off?

Depending on the amount of debt, paying off debt can take years.

This might sound frustrating, but think about how long it took to accumulate debt.

Whether it’s a student loan, credit card debts, personal loans, car loans, or a combination of all, we have accrued debt over a long period of time.

quickest-way-to-pay-off-debt

So, make peace with the existing debt and the time it’ll take to pay off – it’s what it is – and most of all, give yourself a pat that you’re looking into ways to pay off debt and take action.

It’s the burying our head in the sand that makes us miserable, depressed and stressed. 

The moment you decide to take action and tackle debt (as you are now!), you reclaim a control of your finance.

You no longer let your debt situation bring you down.

By the time you finish this post and implement the suggestions outlined, you’ll feel more optimistic about paying off debt with an actual plan to make debt go away in the shortest time possible.

 

Quickest way to pay off debt

Here’s the first thing you need to do to pay off debt quickly.

 

Know all your debt

If you have paid little attention to each debt or avoid knowing exactly how much your total debt is, now is time to get up close and personal with all your debt.

We want to know everything about the existing debt, e.g., the type of debt, the amount, interest rate, the minimum payment and the payment due date.

I suggest you dedicate a notebook for this and write down everything.

Related post:

Would you like to learn more about advice on how to pay off debt, but don’t know where to start? Then see our posts below:

 

 

Take one snap shot of debts

Expanding on the above, devote a page of your chosen notebook to list all your debts in details.

Write them down with details: the type of debt (credit cards or store cards), the amount owed, interest rate, the minimum payment and due date.

Now you have a full picture of how many debts you have and the total amount of debt.

This one-page summary tells you exactly where you stand right now.

 

Decide your debt payment method

There’re two schools of thought on a debt payment approach.

Whichever option you choose, you start by making minimum payment for all debts.

Then you pick one debt to attack at a time.

In choosing which debt to attack first, you have two options: you either pay down the debt with a high interest rate (the debt avalanche method) or attack the smallest debt, regardless of interest rate (the debt snowball method).

The Debt Avalanche Method

Choosing the debt with the highest interest rate. 

This debt payment method will save you more money than the debt snowball method, since you repay the debt with a high interest rate first.

If saving money on interest rates motivates you, go with this method and work your way down from the high interest rate debts.

The Debt Snowball Method

Choosing the smallest debt regardless of interest rates. 

This debt payment method plays on our psychology than a monetary gain.

If you have, say, 5 credit cards debts, paying off the smallest debt gives you a sense of victory and achievement early into your debt paying journey.

It may cost you more money than the debt avalanche method, but encouragement from an early win inspires you to continue attacking the remaining debts.

 

 

Pick one that suits you

Know your psychological tendency and pick the method that will serve you better in eliminating overall debt.

If you’re an emotional spender, for example, the debt snowball method will highly likely work out better for you.

quickest-way-to-pay-off-debt

Remember, there’s no right or wrong.

The one you choose is the right one for you.

Once you’ve chosen the right method, consult your one-page summary above and pick your first debt to attack.

Related post:

Would you like learn more about bad money management? Then see out post below:

 

 

 Automate your payments

Having made a list of all debts, decided the right debt payment method and picked the first debt to attack, set up an automate minimum payment for all debts, so you never miss payment and incur fees.

It also frees up your mental energy for other important things with one less decision to make.

And it stops you from dwelling on debt until it’s time to review it.

 

Throw all the money into one debt

Having set up a minimum payment for all debts, it’s time to laser focus on the one debt you have picked to attack.

Throw every spare money into paying down the debt.

Whether you receive unexpected money, a bonus from work or an extra income from side hustles, the spare money goes to this one debt until it’s paid off.

And do this relentlessly until you pay off all debts.

 

Be realistic with debt payment

Yes, throw all spare money into paying down debt and be reckless, but make sure you take care of your needs first.

Planning to eat ramen every day until you pay off debt, for example, will backfire your debt pay off plan.

Not only will it make you unhealthy and miserable, you’ll most likely give up.

It’s better to have a realistic goal and see it through than beaten by an unattainable goal, back to the square one and feel bad about it.

Related post:

Would like to learn more about how implementing a money mindset can help you achieve financial freedom and live a happier life? Then the post below:

 

 

Enjoy detoxing from spending

Debt paying off journey is an opportunity to detox ourselves from spending.

Buying quality stuff to enjoy a comfortable life is one thing, attaching so much meaning to material possessions is a whole different story.

By putting a lid on mindless and emotional spending, we regain control of ourselves and our life, focusing on what’s really important to us.

Related post:

Would you like advice on cutting down your monthly expenses, but don’t know where to start? Then see the post below:

 

 

Read good finance books

Learning is always good, but reading finance books during your debt pay journey is even better.

Good finance books will inspire you to keep up with paying off debt and help you understand why you do what you do.

Besides, we all can benefit from learning the magic of compound interest that enables us to live a financially independent life.

 

Be aware of friends and family

Keep financially savvy friends close – those who are on the same journey as you – and stay away from friends who encourage you to spend money.

Peer pressure is one of the most meaningless things, but difficult to let go.

Make it easier for you by hanging out with the right people so you can maintain your debt pay off commitment.

 

Keep 10% for yourself

This important principle in building personal wealth is based on pay for yourself first budget.

You might think saving is the last thing you want to do when you’re buried deep under debt, but saving for yourself makes you feel secure about unforeseeable events in the future.

Saving also boosts your spirits as, by saving, you know your life isn’t just about being a slave to debt but learning discipline, figuring what’s truly matter in life and preparing for your future.

 

Ditch your credit cards

If you’ve accrued debt from various credit cards spending, it’s time to reset your money habits and eliminate temptation of spending.

You can definitely undo bad money habits.

Start by leaving the monsters at home!

Do not carry credit cards. Don’t go online shopping. Don’t get tempted by bargains/sales.

credit-card

Do not rationalise your spending with:

It’s only $/£5

Oh, it’s buy 1 get 1 free – I’ll need it 6 months later…

If not buying today doesn’t inconvenience you, you probably don’t need it.

Racking up more debt will seriously hamper our progress.

Learn to live without credit cards by practising cash only challenges regularly.

I can tell you from my experience that it’s not only beneficial to our bank balance, but it’s also fun.

Related posts:

Want to learn more about paying off credit card debt? Then see out post below:

 

 

Add a side-hustle

Increase Your Earning Power, hustlers are everywhere, you can be one too.

Start hustling while keeping your day job.

Not only will it make you money, you’ll also discover your new passion or/and talent.

You’ll be more conscious about the way you spend time, learn tons of stuff, increase your skillsets, become a more valuable/high skilled employee, have a better chance of promotion and pay increase or, who knows, go on becoming the next millionaire!

Most of all, you haven’t got time to check out what’s the next shiny thing to buy!

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Quickest way to pay off debt – Final Thoughts

If you follow the suggestions outlined in this post and take immediate action, trust me, money worries will go away as you take control of your finance.

Look at your one-page summary, think about your motivational factor as mentioned, set up an automate payment for all debts, choose your first debt to attack, throw all the spare money into it and repeat the process until debt becomes history.

With a solid debt pay off plan in place, you’ll start enjoying a money stress free life even if you have debt.

Debt no longer brings your spirits down because you’ve taken the control of it.

You start shifting your attention to things that bring you joy and start living.

If you found this post useful, you might want to save THIS PIN below to your Pinterest Debt board for later!

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Credit Card Debt Tips – Pay off multiple cards!

Today I will be discussing credit card debt tips.

Credit card debt is an absolute moral killer.

If you’ve ever run up the balance on your credit card, then you probably know the feeling. You may be paying more than the minimum payment, but with interest rates of 15-20% or higher, it feels like you’re stuck in a never-ending loop.

One payment forward, two interest fees back. Does the cycle ever end? It’s a depressing way to live.

No matter how daunting your credit card debt seems, there is a way out.

Follow these tips on how to pay off credit card debt, even if you’re broke, there is always a way out and a solution to your problems.

By implementing these habits and methods, I truly believe that you can eventually pay off your credit card debt, and work towards financial freedom.

 

 

Why should I care about paying my credit card debt?

You should care because you don’t want to be burden by those debts and the negative consequences that come along with them.

For example, when you have a high debt to income ratio, your credit score will take a hit, and you may not be able to qualify for much-needed loans like mortgage, auto loan, and the likes.

Besides, the more credit debt you have, the more interest you pay. This money could quickly go to savings if you pay off all your debt.

 

Paying off multiple credit cards

While there are other methods of addressing credit card debt, I focused on two:

  • Cards that had zero-interest balance transfer offers
  • The snowball and avalanche methods

Using the two of those, I was able to overcome my debt.

Other options for paying off multiple credit cards include consolidation loans and debt relief/forgiveness. Consolidation loans can be used in a similar way as to how I used zero-interest cards.

credit-card-debt-tips

However, I personally wouldn’t recommend debt forgiveness if at all possible. It can have a more prolonged, negative impact on your credit.

I also tend to believe that if you get yourself into a situation like that, you need to get yourself out by paying your debts.

With that, I’ll discuss zero-interest credit cards and the snowball/avalanche methods and then go into a bit more detail on how I used them.

 

Zero-interest credit cards

The ability to leverage zero or low-interest credit cards is going to depend on your credit score, your income, and the credit cards you currently have.

These zero-interest credit cards typically include:

  • A balance transfer fee (mine were in the range of 2-5%)
  • A promotional period (anywhere from 6-18 months) after which the card reverts to the regular interest rate

I had a decent (not great) credit score when I had accumulated my credit card debt. My credit score allowed me to still find credit cards with 0% introductory interest rates on balance transfers.

I think I opened at least 4 or 5 new cards to get a low introductory rate. But the great thing about a few of the cards was that I continued to receive balance transfer offers.

I was able to use those offers to move money around to save on interest rates while paying down my total balance.

Now, as I discussed earlier, those balance transfers included a balance transfer fee. However, the fee I paid was much less than what would be charged in interest if I didn’t move the balance.

Additionally, opening new cards will result in hard inquiries on your credit report. But those won’t be as impactful or long-lasting as missed payments or declaring bankruptcy.

 

Pick a debt payoff method for your credit cards 

Now you want to pick payoff method.

There are a few different methods that experts suggest when it comes to paying off debt. We will look at two debt pay off strategies: The Debt Snowball and the Debt Avalanche. 

When paying off multiple credit cards using these methods, you pay off the card(s) with the smallest balance (snowball method) or the highest interest rate (avalanche method) first.

You pay it off with the highest payment you can make each month.

 

The Debt Snowball Method

This strategy is called the snowball strategy because you start small and get bigger.

You focus on paying off the smallest debt first (while still paying the minimums on the others). When the smallest loan is paid off, you focus on the next largest.

Steps to Using the Debt Snowball Method

  • List your debts from smallest to largest.
  • Focus your overpayments on the smallest debt.
  • Continue to pay the minimum on your other debts.
  • Once the smallest is paid off, roll the amount you were paying on that one to the next largest (like a snowball).
  • Continue until all debts are paid off.

Benefits of the Debt Snowball method

The benefit of using the debt snowball as your debt payoff strategy is the concept of little wins. Paying off the smallest amount of debt first will give you a win sooner than other strategies.

This will give you a sense of accomplishment especially if you have many debts.

The snowball method also has the potential to impact your credit scores more quickly since you are paying off individual debts faster.

 

The Debt Avalanche 

The Debt Avalanche strategy focuses on paying the debt with the highest interest rate first (while still paying the minimum on the others).

After paying off the debt with the highest interest rate, move on to the next in line.

Steps to using the Debt Avalanche Method

  • Find the interest rates for each of your debts.
  • List the debts in order from largest interest rate to the smallest.
  • Focus your overpayments on the largest interest rate.
  • Continue to pay the minimum on your other debts.
  • Once the largest interest rate debt is paid off, roll the amount you were paying on that one to the next smallest.
  • Continue until all debts are paid off.

Benefits of the Debt Avalanche Method

Your debts with high interest rates will end up costing you the most. The idea of paying off the debts with the highest interest rates first is that you will save more money this way.

Crunch the numbers yourself to see how much you will pay in interest alone on each of your debts.

 

How to pick a debt payoff method

Each of the debt payoff strategies has its own benefits, so how do you pick between the two?

If you have multiple different debts ranging in size, the debt snowball might be a good strategy for you.

By paying off small debts first you will feel more accomplished when you pay off the last bit of each debt. If you need to feel like you are making a dent in your debt, this is a great strategy to take.

If you are looking to save the most money when it comes to debt payoff, the debt avalanche might be a good option for you.

It may feel like it is taking longer to get your debts paid off, but the math will show you the money wins you are making by choosing this strategy.

When it comes to picking the right debt pay off strategy for yourself you should consider how you mentally process wins.

If you need to see the evidence and truly feel like you are doing something, the debt snowball may be a better option.

However, if you are someone who likes to see the numbers and are ok with not reaching wins as quickly then the debt avalanche may be a good option.

 

 

Credit Card Debt Tips – Pay off multiple cards

Take action as soon as you know you’re in trouble

I was known to avoid conflict at all cost, I was the king of sweep-it-under-the-rug-and-pretend-it-doesn’t-exist.

But when it comes to your credit card debt, the last thing you want to do is shrug it off.

TAKE ACTION NOW!

If you aren’t able to make your minimum payments and do nothing about it, you will incur late fees. On top of that, your interest rate will go up because of those late fees, and your credit score will suffer.

Talk to your credit card company. More than likely, they will be able to work with you to figure out a solution. It’s their money, after all. They want to make sure they get it back.

Whatever you do — do something. Avoiding the situation will only hurt you in the end.

 

Cut up or freeze your cards

Get out those scissors and chop that plastic into little bits. Or grab a bowl, fill it with water, dunk your card, and put the whole thing in the freezer. Both can be good ways to stop using that card!

credit-card-debt-tips

Sometimes not having a card is the only way to break the habit of using it. This almost means you need to log into all those online accounts and delete the saved card information as well!

Eliminate all temptation or possibility of using the card so you get used to not having it as an option.

 

Create a budget

I know budgeting isn’t fun and it sounds cumbersome, but it’s totally worth it. I highly recommend creating a budget because you’ll have a rough idea of what your spending looks like month to month.

It took me a few months to get in tune with my budget, so don’t be hard on yourself if your budget and spending aren’t perfect at first.

Once you get in tune with your budget, your spending will match that and you won’t need to check in with your budget as much if you’d like.

Your budget will show you:

1) how much you spend each month on living expenses (living expenses are what you need to spend in order to live, ex. mortgage/rent, electricity, insurance, phone, internet, groceries, etc.)

2) how much leftover money you have after living expenses.

Now that you know how much money you have left over after living expenses, you have a specific number that you can use for fun spending, debt, and saving.

I personally do not recommend leaving out a fun category in your budget. When you don’t set aside any money for fun spending like restaurant outings, shopping, etc., you burn out.

Remember, we’re creating a debt pay off journey for the long haul that will actually work. Set aside $/£50+ for fun spending (or whatever feels right to you!).

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Would you like to know how to create a budget, but don’t know where to start? Then see the post below:

 

 

Check your habits and track your spending

Always track their spending and are always aware of their money routes. If you will not track your spending, your budgeting will not be as efficient as it should be. Before budgeting for your next month, when you track your last month’s spending, it becomes easy to create a budget and make any changes you need for your next month.

You might agree with me that every purchase we make seems to be very important to us. We are living in a materialistic culture, where much of the attention is given to owning things, even if we don’t need it. I think you will agree with me on this one that If you want to achieve financial freedom, you have to track your spending and figure out the unnecessary purchases.

It will be easy to figure out your budget when you know, exactly where your money is coming and where it is going. There are a lot of apps to track your expenses but you can do it old school way also. Take your pen and paper, and start writing down your expenses. This is the best habit you can develop to stay debt-free.

Related post:

Would you like advice on cutting down your monthly expenses, but don’t know where to start? Then see the post below:

 

 

Use the cash envelope system

At the beginning of each month, take out the amount of cash you have to spend for the month from the bank.

Using labelled envelopes, budget for all of your spending, including food, clothing, entertainment, and bills. Distribute your cash for the month among your envelopes, and stick to that budget. Once the cash is gone from an envelope, that is it for the month for that spending category.

Use Excel to create a spreadsheet to track your spending each month, and make adjustments as needed. If you find that you are running out of cash for food before the end of the month, consider which envelope you could take some money out of to put into the grocery fund.

This style of budgeting is known as the cash-envelope system and has been popularized by financial guru Dave Ramsey. This method goes back years and was most like used by your parents or grandparents!

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Create an emergency fund

A common use for credit cards, other than impulse purchases, is for emergencies. Things just come up that have to be covered if you don’t have the cash for them.

The solution to this problem is to save up an emergency fund.

An emergency fund is a certain amount of savings that you set aside and do not touch unless something urgent and unexpected happens.

Not buying a new couch or iPad, not going on vacation with the girls. Emergencies.

So, if your car gets a flat tire, or your dryer overheats, or your dog gets sick and has to go to the vet.

If you already have money set aside for unexpected events, you’ll be more prepared to deal with them without adding to your debt.

The amount you want in your emergency fund will depend on your situation. I generally like to have $/£1,000 at all times. That seems to cover most minor emergencies and isn’t a crazy difficult amount of money to save for most people.

Take a good look at your situation and figure out a good amount for you to work on saving.

Related post:

Would you like to know how to create a emergency fund, but don’t know where to start? Then see the post below:

 

 

Spend less than you earn

One of the most important steps to reach financial freedom is to live below your means. The biggest mistake people make is to inflate their lifestyle based on how much they earn.

Ignore your friends that spend all their money on a bigger house or a new car! By learning to live a more minimalist lifestyle and understand the things you need rather than the things you want, you will increase your chances of building your wealth.

This doesn’t mean you don’t need to enjoy life during your journey to financial freedom and deprive yourself of everything!

credit-card-debt-tips

If you deprive yourself too much, you risk creating a miserable life. Remember, reaching financial freedom is a long journey: depending on your savings rate, it could take you many years!

Focus on happiness and spending money that will bring joy into your life, instead of thinking about luxury.

You just need to find the right balance and think twice before spending on things you don’t need.

Related post:

Would you like to know how to complete a no spend month to save money? Then see the post below:

 

 

Financial goal-setting

Setting goals is one of the best life hacks you can learn, in my opinion. Setting financial goals will help you achieve what you want most out of life.

One popular goal-setting strategy is the SMART method. I would recommend using this method, your goals should be Specific, Measurable, Attainable, Realistic, and Timely.

You should also consider short-term and long-term goals, and always write down your goals. Finally, your financial goals should be in line with the vision you want for your life.

Related post:

Would you like to know how to set SMART financial goals, but don’t know where to start? Then see the post below:

 

 

Look to increase your income

There are a lot of ways you can increase your income these days.

Many people choose to take on second jobs on their own time, such as freelancing or working in direct sales. Or just a part-time side hustle.

You can also pick up a night job if you typically only work during the day. If your current place of employment could use some more help, talk to your boss about working overtime to get some more hours in.

Another way to increase your monthly cash flow is to consider getting a roommate, or getting on a family plan for your cell phone. You may even consider downsizing your living space if you are paying for a room that you don’t use.

Related posts:

Interested in earning some extra cash through a side hustle? Then see the posts below:

 

 

Credit card debt tips – Final thought

Getting out of credit card debt can seem impossible at times.

But with the right mindset, not only can you overcome your debt, but you can teach yourself to use credit cards in a way that is actually beneficial to you.

Have you struggled with credit card debt? Are there other strategies you used to overcome it?

Please share in the comments below. It may just be what someone needs to make a considerable improvement in their financial health.

If you found this post useful, you might want to save THIS PIN below to your Pinterest Debt board for later!

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14 Habits of Debt Free People – Simple Guide!

Today I will be discussing 14 habits of debt free people and how they can adopt

Have you ever considered being debt free to be a habit? It’s probably not something we would consider often. We think of habits as things like eating healthy and exercising, something that is a regular practice. But being debt free definitely falls into this category.

You see, spending money is a habit, accumulating debt is a habit and therefore breaking this habit requires the creation of another habit – one that is the habit of being debt free.

t is a conscious choice, an effort and a decision that is made, to be debt free, and there are habits that those who are debt free have. Things that help them remain within their free of debt status, and it’s not as simple as creating a budget.

If you’re on the path to becoming debt free, then it’s a good idea to start creating some of these habits for yourself. Don’t stress about trying to add them all in at once – that’s the thing with habits, they take time to create (and that’s okay).

Perhaps you already do some of these things? Or maybe you’re looking for new habits to add in.

Either way, here are 14 habits of debt free people that you can adopt into your life too.

 

 

14 Habits of Debt Free People 

They stick to a budget

Budgeting. Such a dirty word for so many people, but it doesn’t have to be. Having a budget is the best way to make sure you never end up in debt again.

When you have a detailed budget, you know exactly where your money goes and when it needs to go there! This means that there are no surprises and a much smaller chance that you’ll have to use an emergency credit card.

People who are debt free love a good budget because chances are that is exactly how they got out of debt in the first place!

Related post:

Would you like to know how to create a budget, but don’t know where to start? Then see the post below:

 

 

They save save save

This might sound strange but it’s so important to save. If you truly want debt-free living then saving must become normal to you.

For the longest time, we didn’t save any money, partly because we felt that we weren’t in a financial position to be able to do so but also because we just weren’t used to it.

Saving actually felt like a punishment.

In order to save money, you have to have a positive attitude towards it.

habits-of-debt-free-people

You must habitually, purposefully do it otherwise you won’t do it at all. Believe me, I’ve been there.

In the past, the only time I have successfully managed to save was when there was something that I really wanted and my goal was to reach it.

Like the time we needed a bigger house or the time we needed a second car.

Set yourself saving goals, long term ones as well as short term goals. This will make it so much easier for you to save up your money.

 

 

They track their spending

Debt-free people always track their spending and are always aware of their money routes. If you will not track your spending, your budgeting will not be as efficient as it should be. Before budgeting for your next month, when you track your last month’s spending, it becomes easy to create a budget and make any changes you need for your next month.

You might agree with me that every purchase we make seems to be very important to us. We are living in a materialistic culture, where much of the attention is given to owning things, even if we don’t need it. I think you will agree with me on this one that If you want to be debt-free, you have to track your spending and figure out the unnecessary purchases.

It will be easy to figure out your budget when you know, exactly where your money is coming and where it is going. There are a lot of apps to track your expenses but you can do it old school way also. Take your pen and paper, and start writing down your expenses. This is the best habit you can develop to stay debt-free.

Related post:

Would you like advice on cutting down your monthly expenses, but don’t know where to start? Then see the post below:

 

 

They live below your means

Living below your means basically means that you spend less than what you earn. It may sound obvious and simple, but the reality is that many people spend all of their income each month.

It is easily done, especially if you do not have a budget in place or do not look at your bank statements.

habits-of-debt-free-people

If you look at many successful people, you can see that they live below their means. What this means is that they do not spend all of their pay-cheque each month – they save a lot of it instead.

If you want to get out of debt and stay out of debt, living below your means will be the key to doing so. You aren’t going to get anywhere fast if you waste all of your money each month!

 

 

They have a financial goals

Having financial goals is great because it keeps you motivated to work towards something you actually want to achieve.

Financial goals are very subjective and not one size fits all. One person’s financial goal might be to become a millionaire by 50, and another person’s goal might be to get out of debt by 30. It all depends on you and your specific circumstances.

Once you know what your goals are related to your finances, you can start coming up with a plan.

If you are someone who has a lot of debt and wants to pay it off before you turn 30, look at how much you owe. Then, calculate how much you would have to pay every month until you reach 30 to pay it all off.

Sometimes, you may find that you can’t reach those goals in the exact time-frame you set out for yourself. And that’s ok. In that case, set smaller goals which will ultimately get you to your bigger goals and to where you want to be with your finances.

Related post:

Would you like to know how to set SMART financial goals, but don’t know where to start? Then see the post below:

 

 

They have an emergency fund

Take some of the stress out of life by building up a solid emergency fund for rainy days.

It’s not a case of if you’ll need that money someday, it’s when.

Boilers break, cars need repairing, jobs don’t work out and unexpected bills can land on your doorstep at any moment. If you’re not financially prepared for these situations, then you can end up resorting to credit cards or loans to help you out. That’s how you end up in serious debt, and it makes an already stressful situation much, much worse.

Work on building up a rainy-day fund that’s enough to cover 3-6 months (or more if you can!) worth of bills and living expenses should you not be able to work for any reason.

Related post:

Would you like to know how to create a emergency fund, but don’t know where to start? Then see the post below:

 

 

They pay their bills on time

I cannot stress the importance of making sure you pay your bills on time. I know there are situations that occur that are sometimes out of our control but being financially savvy and creating good money habits is about avoiding debt and financial trouble.

There are legitimate reasons why you may not be able to pay your bills on time but there are also reasons that just boil down to not making the correct money decisions.

Your bills should come before anything else. That’s why I always recommend paying your bills as soon as you’ve been paid. That way all the important stuff is out of the way and you don’t have to worry about keeping your money back to pay off your bills.

Aligning all your bill payment dates is another really handy tip to ensure that your bills are all getting paid on time. Make sure all your bills have the same payment date or are very close together rather than being spread out across the month.

 

They know the difference between want and need

Another important habit to have is the ability to know the difference between a want and a need. Making a poor purchase on a want will give you temporary satisfaction, while buying something that you need will be enjoyed long after and won’t be a straining burden on your finances.

When you’re weighing a purchase, you need to take a look at whether it will add more value to your life, or if it will be a setback in your long-term goals.

That’s not to say that you should never buy something that brings pleasure, but you should always consider what value it adds to your life.

Related post:

Would you like to know how to complete a no spend month to save money? Then see the post below:

 

 

Put side hustle money to one side

I made the decision that any side hustle money was to be put in a separate pot.  I’m not what motivated me to do this in the first place but it worked wonders.

habits-of-debt-free-people

Seeing my side hustle income grow independently made me realise how hard I have been working to achieve it.  It also inspired me to make more.

When the figure didn’t grow much over one month, it would give me a kick up the bottom to find more ways of producing income.

Related posts:

Interested in earning some extra cash through a side hustle? Then see the posts below:

 

 

They have a positive money mindset

A money mindset is the attitude you have towards your financial situation.

If you have a negative mindset and continuously think this is the best you can do and it won’t get any better, then that’s where you’re going to be stuck.

If you always focus on what’s wrong, it’ll be impossible to stay motivated. By changing to a positive money mindset, you’ll start making better choices about your finances.

People who are never broke know that money always comes back to them. Just keep thinking to yourself or saying there’s more where that came from.

Related post:

Would like to learn more about how implementing a money mindset can help you achieve financial freedom and live a happier life? Then the post below:

 

 

They surround themselves with like-minded people

Motivational speaker Jim Rohn once said, “You are the average of the five people you spend most of your time with”. We are greatly influenced by relationships and those who are closest to us. These relationships can impact our life in general and our financial life too.

We all have to make tough decisions at some point, especially if you are trying to get out and stay out of debt. That’s why it’s so important to surround yourself with positive and supportive people who will cheer you on as you make progress towards achieving your financial goals.

 

They value experience over things

One of the habits of debt free people is that they don’t focus on material things. They understand that stuff can never be a replacement for meaningful relationships with their family and friends.

People who are determined to get out of debt know that experiences make them happier than things, so they stay focused on reaching their goals.

 

They pay attention to detail

Debt-free people know that tracking their spending is the first step in getting control of their finances. This allows them to see if there are any money leaks in their spending so they can eliminate unnecessary expenses.

They also notice if an incorrect charge appears on their bill and are less likely to miss a payment due date.

 

They do their homework

One of the habits of debt free people is that they understand the importance of doing their research. They understand the basic concepts of personal finance so they can gain control of their money and make informed decisions. They don’t let others make important decisions for them.

They think long-term when making any big purchase and they are not afraid to be pro-active or negotiate to get a better deal. They actively seek out opportunities to save money and increase their income on an ongoing basis.

 

14 habits of debt free people – Final thought

If you want to become debt free (and stay debt free), then adopt these 14 habits of debt free people. The best part? You don’t have to wait until you are debt free to do these things.

Start following these 14 habits of debt free people and they will become YOUR habits as well!

What habits do you need to work on to help you become debt free?  And which ones are you already rocking?  Comment below because I’d love to know!

If you found this post useful, you might want to save THIS PIN below to your Pinterest Finance board for later!

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what-is-the-debt-snowball

What is the debt snowball method? Simple Guide!

Today I will be discussing what is the debt snowball method?

If you’ve ever been into personal finance you’ve probably heard of Dave Ramsey. If you haven’t, Dave Ramsey is a financial guru with his own radio show and the best-selling-book called The Total Money MakeoverI’ve been an on again, off again, listener of Dave Ramsey’s and I totally agree with his debt snowball method of paying off debt.

The greatest thing about the debt snowball method is that it’s so incredibly simple that anybody can understand it! It makes it super accessible to anybody.

Being in debt can really strangle you and make your entire life more complicated. If you’re able to get rid of all your debt, your entire life will change.

Dave Ramsey’s debt snowball method is a great way to start paying off debt because it’s based on psychology and small wins to get you started on the right foot. Let me teach you how to make the debt snowball method work for you!

 

 

What is the debt snowball method?

With the Debt Snowball Method, debts are paid off in order of lowest balance.

Order your debts from lowest balance to highest balance, disregarding minimum payment amounts and interest rates. Pay the minimum amount on all debts.

Pay as much as you can, in addition to the minimum payment, on the debt with the lowest balance. The extra money you plan to apply to debt each month is called your “debt snowball.”

Once it is paid off, apply that minimum payment + your debt snowball to your next lowest balance.

Your debt snowball will grow larger and larger as you continue adding the previous minimum payment to the next debt.

what-is-the-debt-snowball

For this example, let’s say you have £100 extra to pay on debt every month:

Department Store Credit Card = £1,200; 23% interest rate; £55 minimum

Auto Loan = £7,000; 9% interest rate; £190 minimum

Student Loan = £20,000; 6% interest rate; £240 minimum

Travel Rewards Credit Card = £400; 18% interest rate; £30 minimum

Debt Snowball: £100

After ordering these debts from lowest balance to highest balance, you would focus on paying off the Travel Rewards Credit Card first, applying your £100 snowball each month.

Once that is paid off, you will move to the Department Store Credit Card. Your debt snowball at this time will be £130 (£100 initial snowball + £30 Travel Rewards Credit Card minimum payment).

Each month, you will pay £185 on the Department Store Credit Card (£130 snowball + £55 minimum payment).

Once that is paid you, you’ll target the Auto Loan (£185 snowball + £190 minimum payment). Lastly, you’ll tackle the Student Loan (£375 snowball + £240 minimum payment).

In this example, you would be paying £615 towards your Student Loan each month, an extra £375!

Related posts:

Interested in learning about the different methods of paying off debt or advice in paying it off? Then see our posts below:

 

 

Tips for the debt snowball method

  1. Create a Budget

Before you even develop a plan to pay off debt, you should create a budget which lists all of your income and expenses. You need to know where you are starting so that you have an idea of where you are trying to go.

  1. Trim the Fat

Really dig into your expenses and determine if there is anything you can get rid of. This will increase the amount you can apply toward debt payments, hence the income boost listed above.

  1. List All Debts

List all of your debts in order, beginning with the debt that has the lowest balance. Ignore the interest rates. The debt snowball method focuses on paying off the debt with the smallest balances, unlike the debt avalanche method which focuses on paying off the debts with the highest interest rates.

  1. Make the Payments

After you’ve listed all of your debts from smallest to largest, begin making the minimum payments on all balances except for the debt with the lowest balance. Any extra money, in addition to the minimum payment, should be paid towards the debt with the lowest balance.

  1. Earn Extra Income

If you’ve trimmed the fat from every expense that you could and your income is still not enough to kick start your debt payoff, then you might have to pick up a part-time job or start some sort of side hustle. If you need extra income to help get rid of your debt, check out my blog post for

Related posts:

Interested in learning how to create a budget? but don’t know where to start? See our post below:

Interested in cutting down your expenses, but don’t know where to start? See our post below:

Interested in earning some extra cash? Check out my posts below on how to earn money online with a sidehustle fast!

 

 

Debt snowball method excel template

If you want to see quickly how long it will take you to pay off each debt, the best way to do that is using a pre-designed debt payoff spreadsheet. I used the Google Sheets Debt Payoff Template

They also have an Excel version of the Dave Ramsey Snowball Concept and you can choose between the Snowball method or the Avalanche method of debt payoff.

 

Why the debt snowball works

The debt snowball method leverages momentum over math.

The idea is to get a quick win by paying off a small debt first. This win will give you the motivation to continue aggressively attacking your debt.

It’s the same psychology that’s necessary for weight loss. If you can lose those first few pounds quickly, you’ll be motivated to continue your regimen and lose more weight.

what-is-the-debt-snowball

This approach is what distinguishes it from the debt avalanche method.

The debt avalanche method is intended to save you the most money overall by attacking your debt from the highest interest rate to the smallest.

Though, both methods will get you to the ultimate goal of paying off debt.

 

Make sure your debts are organised

This has to be the first step before you even start to plan your debt snowball. You’re going to find it pretty tough to use the snowball method effectively if you don’t organize your debts. You need to know exactly how many debts you have and how much they total.

From there, you can work out your smallest debt and begin the snowball effect. This is one of the steps many people struggle with.

It can be daunting and let’s face it, depressing, writing down everything you owe, and actually seeing it there in front of you. However, by doing so, you’re actually taking control over your finances, rather than letting them control you.

Plus, you’ll soon start to feel much better when you put the snowball method into effect and you see those debts coming down.

Related post:

Interested in learning how to organise your finances, but don’t know where to start? See our post below:

 

 

Why does this method work so fast?

As you pay off debts, the amount that you’re paying on them increases. There are no minimum payments allowed on the snowball debt method–and that is why it works!

Instead of languishing behind constant interest {which never stops} you’re steadily increasing your payments so you can finally get ahead and stay there!

 

My opinion on the debt snowball method

It really depends on your circumstances, but this is definitely a great debt strategy for someone who is feeling overwhelmed by debt.

If you have many debts with varying balances this method could help you to focus on one debt at a time.

what-is-the-debt-snowball

I think the biggest benefit of The Snowball Method is that it can be very encouraging to see each small debt disappear.

Eliminating a debt feels incredible and it is likely to motivate you to continue paying off the rest of your debts.

You’ll probably pay a little more (or maybe a lot more depending on your circumstances) in interest in the long run. That’s something that needs to be weighed against the motivation benefit of this method.

 

What is the debt snowball method – Final thought?

When paying off debt, you must realize that it won’t be easy. No sacrifice is ever easy. If you want to change the trajectory of your life and that of future generations, stay focused and put it in the work.

The debt snowball method really works and it allows you to see your actual progress much quicker than if you had started paying on the highest debt first.

It also keeps you motivated and if followed correctly can have you living a debt-free life sooner than you think. I wholeheartedly encourage you to use this method because it will change your life. It certainly changed mine.

What are your thoughts on the debt snowball method?

If you found this post useful, you might want to save THIS PIN below to your Pinterest Debt board for later!

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Debt Snowball vs Debt Avalanche – Which is Best For Eliminating Debt?

After years of constantly paying out massive chunks of my money on a debt that never seemed to go down, I made the smart decision to focus on reducing my mountain of financial mess to live a happier life.

There are two methods that financial experts recommend for destroying your non-mortgage debt: The Debt Avalanche Method and the Debt Snowball Method.

This post explains the difference between the two strategies so that you can decide which one is right for you.

I’m also going to share which method I’m using and why that method is best for me.

 

 

My story with debt

Up until 2018 I was constantly in debt, living month by month scraping by. It’s not a nice position to find yourself in, but there are ways to get yourself out of debt.

It will definitely be a difficult task to pay off debt with low income, but if you’re determined, it can be done.

To pay off any debt you are going to need to DECIDE and COMMIT to the process. Following these two principles is so important, you will not succeed if you don’t.

debt-1

I believe you can pay off your debt. With determination, persistence and commitment, it can be done.

I started the Debt Snowball method back in 2018, but I will be talking you through both methods and what they have to offer.

Now let’s break down the two strategies.

Top tip

See my post for setting financial goals:

 

 

The Debt Snowball Method

With the Debt Snowball Method, debts are paid off in order of lowest balance.

Order your debts from lowest balance to highest balance, disregarding minimum payment amounts and interest rates. Pay the minimum amount on all debts.

Pay as much as you can, in addition to the minimum payment, on the debt with the lowest balance. The extra money you plan to apply to debt each month is called your “debt snowball.”

Once it is paid off, apply that minimum payment + your debt snowball to your next lowest balance.

The-7-Big-Lies-People-in-Debt-Tell-Themselves.-Are-You-Guilty__Horizontal

Your debt snowball will grow larger and larger as you continue adding the previous minimum payment to the next debt.

For this example, let’s say you have £100 extra to pay on debt every month:

Department Store Credit Card = £1,200; 23% interest rate; £55 minimum

Auto Loan = £7,000; 9% interest rate; £190 minimum

Student Loan = £20,000; 6% interest rate; £240 minimum

Travel Rewards Credit Card = £400; 18% interest rate; £30 minimum

Debt Snowball: £100

After ordering these debts from lowest balance to highest balance, you would focus on paying off the Travel Rewards Credit Card first, applying your £100 snowball each month.

Once that is paid off, you will move to the Department Store Credit Card. Your debt snowball at this time will be £130 (£100 initial snowball + £30 Travel Rewards Credit Card minimum payment).

Each month, you will pay £185 on the Department Store Credit Card (£130 snowball + £55 minimum payment).

Once that is paid you, you’ll target the Auto Loan (£185 snowball + £190 minimum payment). Lastly, you’ll tackle the Student Loan (£375 snowball + £240 minimum payment).

In this example, you would be paying £615 towards your Student Loan each month, an extra £375!

 

My opinion on the Debt Snowball Method

It really depends on your circumstances, but this is definitely a great debt strategy for someone who is feeling overwhelmed by debt.

If you have many debts with varying balances this method could help you to focus on one debt at a time.

I think the biggest benefit of The Snowball Method is that it can be very encouraging to see each small debt disappear.

Eliminating a debt feels incredible and it is likely to motivate you to continue paying off the rest of your debts.

You’ll probably pay a little more (or maybe a lot more depending on your circumstances) in interest in the long run. That’s something that needs to be weighed against the motivation benefit of this method.

 

The Debt Avalanche Method

With the Debt Avalanche Method, debts are paid off in order of highest interest rate.

First, order your debts from highest interest rate to lowest interest rate. If possible, pay more than the minimum payment on your debt with the highest interest rate. Pay the minimum amount on everything else.

businessman-workig-using-calculator-with-laptop-desk_34152-1467Once the highest interest rate debt is paid off, move to the debt with the second highest interest rate. Add your previous debt payment + any extra money to increase the amount paid on the next debt, and so on.

For example:

Department Store Credit Card = £1,200; 23% interest rate; £55 minimum

Auto Loan = £7,000; 9% interest rate; £190 minimum

Student Loan = £20,000; 6% interest rate; £240 minimum

Travel Rewards Credit Card = £400; 18% interest rate; £30 minimum

You would pay these debts off in order of highest interest rate. Therefore, you would focus on paying off the Department Store Credit Card first.

Once that is paid off, you will apply its minimum payment to the Travel Rewards Credit Card each month (£55 + £30 = £85/month).

Next, you’ll pay off the Auto Loan (£55 + £30 + £190 = £275/month). Lastly, you’ll tackle the Student Loan.

By that time, you’ll have at least £515 to pay on it each month (an extra £275)!!

 

My opinion on the Debt Avalanche Method

The Debt Avalanche allows you to pay off your debt faster. This is because your debts will accumulate less interest over time.

You will pay less in interest if you use The Debt Avalanche because your higher interest rate debts will be eliminated first.

In my opinion, a prerequisite for choosing The Debt Avalanche Method is to already be extremely motivated to pay off your debt.

You won’t get the exciting boost that comes with eliminating small debts along the way. However, if that isn’t something you need because you are already motivated, The Debt Avalanche could be right for you.

 

My advice for any debt strategy

Whichever debt payoff method you’ve decided is best for you, the important thing is to focus your extra payments (all payments beyond minimum payments) on just one debt at a time.

Paying a little extra on each loan isn’t going to help you very much. You’ll lower each debt a tiny bit more each time, but you’re not going to get to a point where you’ve completely paid off a debt.

debt2

The common goal of both the Snowball and Avalanche Methods is to eliminate one of your debts as quickly as possible.

In doing so, you free up funds to forcefully apply to another debt. This keeps you motivated and it’s the most effective way to eliminate your debt.

Top tip

See my post for setting financial goals:

 

 

Which debt payoff method is right for you?

The Snowball Method might be right for you if you…

  • want to be motivated to continue paying off your debts or you want the encouragement that comes from successfully paying off a debt
  • have several debts of varying sizes
  • don’t have any debts that have a super high interest rate (3-4x your other interest rates)

The Debt Avalanche Method might be right for you if you…

  • are already super motivated to pay off your debts
  • only have a few (2-4) debts
  • have one debt with a much higher interest rate (3-4x) your other debts
  • simply hate one debt more than the rest

 

What method am I using?

I decided on the Snowball Debt Method. This is because at the time I had minimum finances coming in, therefore I would have struggled to make a dent on the bigger debts.

I have paid a big chunk of debt off, but still have a small amount (compared to my original debt) to pay off before being financially free.

 

Debt Snowball vs Debt Avalanche – Final thought

Personal finance is personal. Don’t worry about which method works for your friend or your parents. The most important thing is that you don’t give up.

You know which plan will keep you engaged! Maybe saving thousands of pounds/dollars in interest is motivating enough for you to stick to the Debt Avalanche method.

Eliminating your debt isn’t a one-size-fits-all process. What’s right for someone else might not be right for me. And what’s right for me might not be right for you. You need to take a close look at your own debts.

Or perhaps you’re just starting out on this journey and need a few early victories to get the momentum going.

Just be honest with yourself, and you will be successful!

Are you using one of these debt methods? What are the most significant challenges you’ve faced in your journey to become debt free?

If you found this post useful, you might want to save THIS PIN below to your Pinterest Debt board for for later!



10 Tips To Pay Off Debt – This Guideline Helped Me Pay Off My Debt!

Up until 2018 I was constantly in debt, living month by month scraping by. It’s not a nice position to find yourself in, but there are ways to get yourself out of debt.

People will say “how am I supposed to pay off debt when I can’t even pay my bills?” Without stating the obvious, you need more money.

It will definitely be a difficult task to pay off debt with low income, but if you’re determined, it can be done.

To pay off any debt you are going to need to DECIDE and COMMIT to the process. Following these two principles is so important, you will not succeed if you don’t.

The below 10 tips have worked for me, and I believe they will work for you. It won’t be easy, and with low income, it will definitely be harder and take you longer.

I believe you can pay off your debt.

With determination, persistence and commitment, it can be done.

 

 

Make the debt your top priority

This is not easy. Our money is spent in many different ways and paying off debt is never fun.

But once you manage to pay it off, life will be much better and the weight of the world will come off your shoulders. You will have more money to enjoy life and be more flexible with your spending.

In order to get to this stage, you need to make working towards being debt-free a high priority in life.

debt-tips

This will look differently depending on your specific circumstances.

For example, a family could pay their essential bills each month, and then pay as much as they possibly could to their debts, while leaving enough left over for the grocery budget and basic needs.

You need to live simply and not purchase expensive things you don’t need. You might not be able to do an activity with friends because it’s too expensive, but you need to think of the end goal of being debt-free.

By doing this it means you are committed to being debt-free as soon as possible. Someday, you will be free of the money issues and be able to spend your hard-earned cash on those nice things you have missed out on while being focused on reducing your debt.

You can kill off your debt. But you have to make it a priority!

 

Debt strategy

There are 2 main debt strategies, these are called the Snowball Method and The Avalanche.

I started the Snowball Method back in 2018 and have paid my debt off after two years.

I encourage you to really look into and consider these two methods. Talk it over with you partner (if you have one) and put a plan into place.

Once you decide on the method that’s right for you, commit. Dedicate yourself to a plan, and stick to it.

Don’t be afraid to re-evaluate your plan if your financial situation changes.

Related post:

Want to find out more about the Snowball Method and The Avalanche Method? See my post below for a detailed breakdown:

 

 

One debt at a time

For a while I was making the mistake of spreading my money over various debts. I found this to be more of a long-winded way to pay off my debt.

At the time I believed that spreading my payments would help me pay off the debts faster, but this definitely wasn’t the case.

Focus on one debt at a time, once this is paid off, then move on to the next. I started with the smallest debt then moved onto the next in size after that.

By doing this method I paid my debt off faster.

 

Cut back on expenses

with the savings you make on cutting back, pay it off your debt.

It’s really as simple as it sounds. The more you can throw at your debt, the faster it will be paid off.

Tips-for-debt

Anywhere you can cut back, then do so.

There are so many ways to cut back on your everyday expenses. It takes some work and effort. Sometimes it takes sacrifice. But after a little while it becomes second nature.

The most important thing about cutting back, is that the money you save actually goes on the debt. Don’t spend it on other things you don’t need.

Every dollar/pound you save, should go straight towards your debt.

Related post:

Want to find out more about how cutting expenses can help you save tonnes of money? See my post below:

 

 

Set yourself a target of coming under budget

Then, devote those savings to your debt!

Before doing this, you need to be able to stick to a budget. But, once you’ve mastered that, then keep going.

Try to come in under budget by spending less than you planned.

Cut back a little bit at a time. Read about ways to save money on food and groceries here.

Then, just like cutting back on your expenses, ensure the money saved goes towards your debt.

Related post:

Do you struggle with the organisation of your finances? Then see my posts below which will help:

 

 

Live a frugal life

There is no doubt that frugality is one thing that keeps you rich and sorted. A small step towards frugality can help you make some big savings that can repay a big chunk of your debt.

Related post:

Want to find out more about living a Frugal life to save money? See my posts below:

 

 

Stop taking on more debt

When you are already in debt the worst thing you can do is to continue taking on more debt.

This can be hard, especially if a lot of your debt is credit card debt from indulging in shopping and impulse buying.

Adding more debt while you are working hard to pay off your existing debt is like throwing your money away.

 

Learn to say NO, to your kids and to yourself

We often don’t realise how much money we waste on things that we don’t really need.

We impulsively get convinced by friends to go out when we can’t really afford to, or we end up spending more than we actually planned to.

Sometimes, unplanned expenses take over our financial goals and it’s too late before we actually realise it.

In order to be debt-free tomorrow, you need to make the necessary sacrifices today.

 

Stop obsessing over what your pals are doing

Peer pressure and an associated desire to live a rich life often forces us to make wrong financial decisions.

You are randomly scrolling through your social media feed, only to catch a glimpse of your old school friend vacationing at an exotic location and you can’t help but obsess over wanting to do the same.

10 Tips To Reduce Debt

Well, that’s when you need to get hold of your wants and think of spending money on things that you actually need, or you will be driven to a life that might drown you further into a pool of debt.

Focus on what you can afford and not what can drive you further into debt.

 

Increase your income

In order to get out of debt as quickly as possible, it’s important to expand your stream of income.

You could work extra hours or pick up a side-hustle to chip in with some extra money. This comes with a need to work harder, but these sacrifices will enable you to pay off the debt faster.

TOP TIP:

Check out my posts below on how to earn money online fast!

 

 

10 Tips To Pay Off Debt – Final thought

Being in debt is a nightmare, it’s a horrible thought, knowing that most of your hard-earned money is going on paying off debts.

That’s why it’s so important to put a plan in place to pay it off as fast as possible. Make your debt a priority and cut back where you can to reduce it as soon as possible.

These tips are a great place to start, and helped me pay off my debt.

Pick a strategy, sick to it with commitment and determination, so in the near future, you can live a care-free, debt-free life.

Make sure that you focus on one debt at a time. Cut back on your expenses and try to come in under budget so that you have extra money to dedicate to your debt.

If I can do it, so can you!

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