Whether you’re in debt with credit cards, student loans, car notes, or house loans, we all have some form of debt.
The thought of paying off your debt might seem stressful at first but imagine what a debt free life could mean for you.
Debt keeps us from saving money, investing it, and reaching financial freedom.
So, what’s the best method to eliminate debt?
The Snowball Effect
There are a few proven methods to paying off debt. We favor the snowball effect method due to its quick momentum and effective results.
This is how it works
You start by paying down your smallest accounts first while making minimum payments on the rest of them.
The approach is to eliminate your smallest debt aggressively. Once you’ve paid off your smallest account, rollover that payment onto your next account.
By the time you’re paying off your third account, the amount equivalent to your monthly payments from the first two will have a drastic effect moving forward on your outstanding balances.
Avoid This Mistake To Stay Debt Free
In order for the snowball effect to build momentum, you must be consistent and not divert from rolling over once your first debt has been eliminated.
Most people will fill in the space with something else once they’ve paid off their car or credit cards for example.
This spending habit pulls you back to a never-ending cycle.
Remember, once you’re debt free all that disposable income is yours to enjoy. Save it, grow it by investing, and enjoy it!
Don’t let income creep lifestyle keep you from reaching your financial goals.
This is how people making six figures a year can be in financial ruin just as much as anyone making five figures.
Read: How To Set Financial Goals: 10 Simple Steps!
Generate More Income To Tackle Debt
Everyone has very different financial situations or worlds.
Create a world where you’re earning a little bit more than what you were in order to apply this additional income towards your debt.
Check out “These Are The Best Side Hustles For Millennials in 2020” to read about the best side hustles that can earn you additional income this year to make it happen.
Continuously work towards earning more income to pay off your debt more aggressively.
The sooner you payoff one debt, the sooner you can move on to the next while eliminating accruing interest.
Create A Budget
Use a loan calculator for your student loans to understand and save better on bigger payments, as well as finding areas you can budget for, such as junk food, streaming services, and other non-essentials.
You’d be surprised at how much you can save a week by meal prepping instead of eating out daily.
Write down your expenses and see where you can cut back. This strategy will help you not only develop a winner habit but play an important role in your journey to a debt free life.
Mint is a great app that breaks down your expenses and allows you to have an overview on all your account balances.
It Takes Discipline
The fact that you’re here shows your willingness to make this incredible change in your life.
Financial freedom is an amazing experience we all deserve a chance to.
Realistically, only by taking the necessary actions to see our goals through will we truly reach a debt free life.
It’s time to live in the moment and focus on the things that truly matter to us the most.
Be consistent, stay on top of your goal, you have the power to do this.
Read: 10 Successful Ways To Save Money During A Recession