Eliminating your debt can seem impossible at times, especially if you are carrying large amounts of high interest credit card debt. If you are paying only the minimum payment, then most of your money is going towards interest charges and the account balance is barely moving. Fortunately, by following the path to debt freedom, you can eliminate you debt and reduce the chances that you will rack up more debt in the future. Navigating the path to debt freedom is not as hard as it may sound.
Step One – Change Your Entertainment Options
You can reduce the amount that you are spending each month by a considerable amount by simply changing your entertainment options. Certain activities, like going out to dinner or going to the movies, are pretty expensive and there are many low cost alternatives available that are just as much fun. Instead of seeing a movie in a theater on the weekend that it comes out, wait for a couple of weeks and pay a much cheaper ticket price to see it at a second run theater or to rent it to watch it at home. Instead of going out for an expensive dinner, meet up for lunch at a diner instead or hang out together with a pizza and a movie at home. Drinking at home costs about a third of the amount of drinking the same amount of drinks at a bar. These simple adjustments can save you hundreds of dollars each month.
Step Two – Adjust Your Budget
The next step on the path to debt freedom is to adjust your budget to free up more of your money for debt repayment. If you are not currently using a budget to track your earnings and spending, now is the time to start. Without a budget, you do not really know where all of your money is going each month and you may be paying more than you realize for things that are not very important. Adjust your budget to scale back your spending for non-essential items and put the money saved towards paying down your debt.
Step Three – Reward Yourself When You Reach Milestones
It will be very difficult for you to remain on track with your debt elimination goal if paying down your debt is all about deprivation and punishment. Instead, you should set up milestones to reach on your path to debt elimination and reward yourself when you have reached each milestone. The reward does not have to be anything expensive to be motivating, just something that you know you would enjoy. Rewards I have heard of include purchasing a new pair of shoes for paying down $5,000 in debt or buying a new, inexpensive outfit for paying off a credit card.