Ways to Be Debt Free

Establish a Budget

Sit down and list fixed and flexible expenses. Fixed expenses are car payments, house payments, loan payments, insurance, etc. Flexible expenses are bills and expenses that may fluctuate from one payment to the next or have room for negotiation such as the cable bill (you may consider a less-expensive package), utilities or credit cards.

List all income and determine how much of your income is left over after expenses. Look at your flexible expenses and consider all options that will increase the amount of income left over after expenses. Things that you may want to look at include: the amount spent eating out, selling a second vehicle that isn't really used, or reducing your cell phone plan to achieve a lower rate.

This is the first step to living debt free; knowing how much money you really have to save and spend after the bills are paid.

Refer to the budget you created and write down each debt that you have and determine the amount of interest associated with each one. Although it's a sound mathematical decision to pay off the debt with the highest interest first, psychologically one may benefit more by paying off the debt with the lowest balance first. Individuals may remain motivated to continue their endeavor to become debt-free when they are able to see progress quickly. Choose one method, the highest interest or the lowest balance, and tackle it head-on to pay off you debts.

It is senseless to have a goal of becoming debt-free while incurring additional debt. One contradicts the other and it simply will not work. In order to become debt-free and live debt-free one must live without using credit as a resource. When credit cards are paid off, cancel the account. For purchases that cannot be made on your current budget, consider a layaway plan.

Whether your budget allows you to save one dollar, or one hundred dollars each week, be diligent about saving. The amount saved will help in situations where you would normally rely on using a credit card.