Like most people we want to get debt free and stay that way. To do this you need to have plan in place that will ensure this happens and stays that way, and with most people they don’t have a set of guidelines to follow to help them along the way. So in this article I’m going to cover 4 simple steps you can follow to get debt free.
Build A Budget. The first things you need to do is create a budget. However most people don’t like to do this since it requires so much work, but their is a solution, Mint.com. Mint is the ultimate budget solution, because all you have to do is link up your accounts and Mint will do the rest.
You can set up your budget one time and forget about it. In fact they even have apps for your iPhone that can alert you when accounts have a low balance or your going over your budget. Finally the best part about this tool is that it’s totally free.
Save $1000. Next you need to save a $1000 as fast as you can. With an extra $1000 sitting in your hands you be able to sleep better at night knowing you don’t have to worry how you’re going to pay the bill next month.
To save this money up simply start combing through your budget line by line to find places you can put more cash towards this. Cut down your credit card payments to the minimum and save the extra cash back. Finally, if you have to take up a part time job.
Debt Snowball Plan. Now that you have a budget in place, and a $1000 saved up you can pay off your debts. To set up your debt elimination plan all you have to do is gather up all your debts and align them from the lowest debt balance to the highest.
Then start by paying the minimum payment toward each debt accept the debt with the lowest balance. This debt should receive as much extra cash as possible to pay off the debt, at least a $100 or more. Then once that debt is paid up move on to the next debt with the lowest balance putting as much cash as possible towards that debt. Continue this until all debts are paid off.
6 Month Emergency Fund. Finally, the last thing you should do once all your debt is paid free and clear is to build a 6 month emergency fund. This way if you happen to lose your job you could at least operate for the next six months. To do this setup a separate account this way you will be less likely to touch the money.
Next consider how much money you need to survive each month and times that by 6. For example, if you need $3000 a month in cash to pay bills times that by 6 and you should have at least $18,000 in your emergency fund to survive.
In the end follow this plan and you’ll be much more likely not only to pay off your debts but stay debt free in the end.