5 tips to help accomplish a debt free 2015

If 2015 is the year you plan to get out of debt, then what have you done to make it happened? Essentially, the only way to eliminate your debt is to take control of your expenses and your income. Developing a plan to pay off your debt makes you better capable of, not repeating the mistakes that created the mountain of debt. Also, once you’ve paid off debt, you’re likely to not want to return to your previous situation. Financial planner, Wally David, author of thesmartmoney.com.au says, “If you don’t change those behaviors you won’t actually solve the underlying problem.” Some people have an emergency happen and are thrust into a financial sinkhole, but more often it happens because of simple debt accumulation from overspending. It’s easy to spend money and ignore the bills that arrive in the mail and choose to worry about the debt later. It’s never been easier to buy things with money you don’t have and accumulate debt for things you don’t need. If you are ready to make this the year you end the debt spiral make use of the tips below to get started.

Debt Free 2015

  1. Be aware

The first step in solving a problem is admitting that a problem exists. Start taking a serious look at what you are spending and why. What is causing your spending or financial crisis? Are you underemployed? Do you have medical or personal issues that reek havoc on your budget? Regardless of the reason your finances are in trouble, the first step in fixing them is changing your habits and acknowledging the situation.

  1. Select a strategy

There are various methods and books written to assist in the goal of eliminating your debt. Two of the most used are the avalanche method and the snowball method. The avalanche approach begins with tackling the highest cost debt first. Debt with higher interest rates grows faster than cheaper debt so beginning with this debt will loosen up large amounts of your budget as you pay off larger items. The Snowball method pays smallest debt and uses the sense of accomplishment and the freed money in the budget to give confidence and finances to keep “the ball” rolling.

  1. Debt consolidation

Debt consolidation is essentially a loan. Debt consolidation only works if you’ve completed step #1 and are certain that you have tackled the issues that encourage your overspending. By freeing up the debts on all your credit cards and moving them to one place and creating one bill, you are better able to manage your debt; however, you’ve also freed up your access to available credit. So, beware.

  1. Work out your target

Your target is not always the sum of your total debt load. You can prioritize expensive debts like credit cards and auto loans. Cheaper debt like student loans and mortgages are usually less expensive debt and are far less detrimental to your financial health.

  1. Reward yourself

The economics of the situation is simple; people are motivated by goals, typically intrinsic goals. Don’t be afraid to reward yourself for your hard work. When you’ve set your target and achieved it treat yourself to something special. Don’t be afraid to spend your money after you’ve paid your debt. Your goal should be responsible spending because that is a healthy goal.

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