The taste of financial freedom is nothing short of ecstatic. It is a gift to live debt-free.
Living debt-free is gradually becoming a myth as the economic situation stifles financial decision-making. You will agree with me that debt is not necessarily a bad thing.
It becomes a problem when you allow it chokes you. Understandably, financial emergencies could happen to anyone. And the easiest route to tackle this is through loans. That is not to say, living debt-free is impossible.
That said, I will drop you these tips to help you navigate this debt cycle.
1. Analyze Your Debts
Not keeping track of your debts is the fastest route to entering a debt cycle. This single act is capable of denying the financial freedom that you seek.
Loan firms make the details of your loan accessible when needed. It means that you have to know how much you are owing and how long you have until you finish the repayment.
When doing this analysis, it is relevant to put the following in mind:
- The cumulative amount of all pending loans
- The interest rate of each loan so you can prioritize repayment efficiently
- The repayment time frame for all pending loans
Once you have all this information, you need to find out how best to knock them off.
2. Analyze Your Income
Income is the only means by which you can tackle your loans. The more knowledge you have about your income, the better your chances of using it to your advantage.
To analyze your income, you must know the following like the back of your palm:
- Every penny that enters into accounts – salaries, bonuses, tips, and others
- You must understand every penny that leaves your account.
- You must be able to calculate your cash flows.
- You must not allow lifestyle to cripple your inflows.
The moment you check this box, building a plan is next.
3. Create A Concrete & Workable Plan
You will keep living in the dreamland of financial freedom without solid plans.
It is easier to want to do something. It is harder to take actionable steps to make things come alive.
To be up and doing with the plan, it has to be something you can do for a while. Concrete and workable plans give better chances of escaping the debt cycle.
Your plan might be to improve your income, minimize your expenses, knock off the high-interest loans, or stop taking additional loans.
Whatever your plan, discipline, and focus are vital to achieving desired results.
Let’s quickly get to the next one.
4. Live Within Your Means
Did you get into this debt cycle due to poor personal choices?
Are you living a glamorous lifestyle and building up debt?
Do you spend more than you earn?
If the answer to these questions is YES, you have an easy way route out of this cycle.
You have been living above your means – that is what brought you here. The way out is to start living within your means.
Understand your needs and be deliberate about sorting them out while improving your disposable income. It helps you service your loans smartly.
5. Build An Emergency Fund
You seem surprised at this one.
Yeah, I figured you would be!
Imagine a world where you do not have to resolve to get loans to solve the slightest financial emergency that comes up.
Just picture you have a pool of funds to take from during an emergency. That feeling is surreal, and you can feel the same without doing the impossible.
I understand that you might be unable to build this while repaying your loans. What you need to do is have it as a top priority – so that you can start saving as little as possible towards it.
Emergency funds improve your financial freedom as you have something to fall back to when life happens.
Attaining financial freedom through breaking out of the debt cycle is not easy. But, it is doable.
With discipline and focus, you can repay all your loans and build a solid emergency fund that helps you stay clear of falling into the trap again.