Living a debt-free life is, for sure, liberating. It is nice not to feel that you owe somebody money. In this article, pick tips and techniques on how to be debt free. Choose the best way for you to decrease your debt or even totally eliminate it. And hopefully, you can start your journey towards debt-free living.
Why choose to become debt free?
For many people in Singapore, debt has been a part of their lives. Surely, applying for loans and taking debts are necessary at times of financial crises and emergency situations.
This does not mean, though, that we have to live our entire life in debt. To get out of debt can be challenging, but living a debt free life simply improves our mental health, saves us money, and improves our overall credit rating.
10 Ways to Become Debt Free
1. Bump up your debt repayment percentage
If you are currently dedicating 10% of your income to repay your existing loans, why not try to make bump it up and make it 15%? Instead of paying your debt in 15 months, for example, you can finish paying it up in 10 months. This could mean that you save money by not paying 5 months’ worth of loan interest rate.
2. Use savings to pay down larger debts
If you are paying a high-interest rate loan or debt, you can actually use your savings to pay it down. Financial advisors would say that touching your savings is a bad idea. But, in the case of a loan that is charging you too much of interest, it is better to use your savings. This would benefit you in the long run because this decision will save you a lot of money.
Probably one of the high-interest-rate loans is student loans or education loans. We know a lot of stories where people drown in debt because of student loans. Given this, why not try to settle loans like this, so you do not incur any further additional debt. In doing so, you can get out of debt faster and easier.
3. Negotiate debts for a lower interest rate
This is not done enough, but do you know that you can actually negotiate with your creditor regarding the interest rate of your loan? Call them up and ask them if they are willing to reduce your interest rate. Show them that you have been a loyal customer to them, and giving you a deal would keep you in their company.
4. Use your tax refund check to pay existing debt
Let’s admit it, we tend to use our tax refund for a vacation, a shopping splurge, or an unimportant big purchase. But, as responsible adults, we can actually use our tax refund to become free from debt. Instead of spending our bonus money on unnecessary things, we can instead use it to sort our existing credit or loan.
5. Sell unused stuff to pay debts
Turn your “junks” into money that could eventually help you pay off your credit. Some of the things you have at home are probably just collecting dust. Selling preloved things online has become a trend in recent years. Use popular sites like Carousell, Deluxemall, or Locanto to help you find the right buyers. You can also maximize social media sites like Facebook and Instagram to sell the items you wish to dispose of.
6. Apply for Credit Balance Transfer
There are credit accounts that charge a high interest rate. To save up money and reduce your debt, you can ask your creditor to transfer your credit balance to a zero percent deal. While you still have to pay off your debt, you are saving a ton of money because you do not have to pay for interest, which, let’s be honest, can be unfairly high.
7. Avoid expensive hobbies
When it comes to managing your money, spend only on things that are necessary. Prioritize things that you need instead of what you want. One way to know where to spend your cash is to determine the return on investment (ROI) of each of your spending. Avoid taking hobbies that cost you a large amount of money but do not really have valuable returns to you and your finances, like golfing, gaming, riding, etc.
8. Scale back your lifestyle drastically
A lot of people acquire debt because of their lifestyle. If you are one of these people, you have to reflect on your expenditure. Assess which item is costing you the most each month. Chances are, these big purchases are what’s keeping you in debt.
For example, if you see that you are spending way too much on take-out food, try to cook your food at home. Doing this could save you up several hundreds of dollars. The cash you get to save can help you clear your debt.
9. Cut-up your credit cards
Know that credit cards charge a higher interest rate compared to other loans. Also, your credit card debt earns a compound interest, which means that for each month that you miss a payment, you are being charged more. If you accumulate your credit card debt, you are likely to be buried in debt in years or even in decades.
10. Start Investing
To be debt free, you might want to start investing. Paying off debt is only possible if you have enough funds, but if you don’t have funds to begin with, you cannot really make any financial adjustments. Get more funds by investing in people or businesses who are likely to give you profit. By doing so, you get to have enough money to be debt free in the next years or even months if you invest wisely.
Commit to Staying Debt Free
There is freedom in staying debt free. Instead of using your time and energy in paying off your debts like credit card debt or student loans, you can use them to enjoy your life. You are more likely to have fun spending your cash on things that you like instead of using it to settle debts. And, once you have settled all your debt, try to remain so for the rest of your lives.
It is true that taking in loans and debts is necessary at certain times. It could save us at times when we need a big purchase and do not have enough savings.
If in case we borrow some money, we just have to make sure that we pay these debts so that we do not get drowned by them.
As mentioned above, one way to do so is to apply for a loan so that we could settle our debts that are costing us way too much.
If you wish to know more about the process of being debt free, check out Loan Advisor to learn more tricks and tips not only in settling off your loans and debts but in managing your finances as a whole.
Loan Advisor has lots of materials to help and guide you to learn more about clearing your debts through loans and other mechanisms. We can teach you how to use loans to be free from debt. Shoot us your questions here, and we will get back to you as soon as we can.