Many people have accrued debt in the last few months. However, there are ways you can start to become debt free in 2021. Find out 5 ways to do so!
5 Ways to Become Debt Free in 2021
Regardless of the stage of life you are in, the burden of any kind of debt can be overwhelming to say the least. From single students to stay-at-home parents, the perpetual worry, strain, and pressure that comes with debt can disrupt anyone’s peace of mind.
If you are currently looking to break the barriers of debt yourself, there’s no better time to start than now. The reason behind this motto is simple: the sooner you shed your debt, the more you can thrive in life. Otherwise, you are left to tend with the effects of high interest rates and rollover payments among other challenges.
To help you steer past your debt, here are 5 ways to become debt free in 2021.
1. Make a Budget
One of the best ways to allocate extra funds towards debt payments is making a budget. Whether you are starting college with student loans or buying groceries for your home, a budget helps you stay on track and prevents superfluous spending.
To get started, you can use a budget calculator that helps you put all critical numbers in one place. You can then follow this budget to save and set aside money every month to pay off your debt such as student loans, credit cards, and personal loans.
2. Note Down All Existing Debt
To stay on top of your debt, you need to actually know how much money you owe to your lenders. Simply make a note of these liabilities in a cash planning journal, which also allows you to keep track of your income and expenses.
When used in line with your budget, this can help you keep tabs on your overall debt. As a result, you can see the severity of your financial status in real time and make your spending and debt payment decisions from a place of knowledge.
3. Pay Off Expensive Debt First
There are multiple types of various types of debt such as mortgages, student loans, credit cards, and auto loans. If you have more than one category of debt over your shoulders, it is important to differentiate them when planning for repayment, for example understanding the payment terms.
This helps you take control of your finances and understand which of your debt commitments are costing you the most each month or year. Simply write these details in your foldover notebook, and you can prioritize your debt payments according to this information. Typically, you’ll want to prioritize those with high interest rates because the longer you have them, the more they’ll cost you.
4. Look for Deals and Discounts
No matter if you are shopping for summer clothes or buying a new dresser, always look for deals that offer discounts on the original price. This particular tip is not difficult to follow and doesn’t ask you to let go of basic needs of life. But it still helps you save a significant amount of money in the long run.
You can use this approach to search for vendors who are known for their discounted prices, or even shop at regular retailers only when they are going through a sale season. It’s also easy to add an extension that features daily deals to your browser. This ensures that you can save some money to contribute to your debt payments.
5. Make Prepayments When Possible
Many lending products such as mortgages allow prepayments. These payments shave off the principal that you owe to the lender, and in turn reduces interest accumulated over the duration of your loan. Even when you have done your best to find competitive mortgage rates, this tip can add more affordability to your debt payments.
To make these prepayments, you can use any additional funds you have saved from your budgeting and smart spending. For best results, you should use these prepayments with loans that span across a few decades. A home loan is an excellent example in this regard.
By keeping these suggestions in mind and finding ways to apply them to your own spending habits, you can become debt free in a timely manner. The best part? You don’t have to go completely frugal to do so.