How to Pay Off Debt and Save for the Future
Debt is so easily obtained yet so difficult to settle at times. As consumers, we often get heavily caught up in the debt trap. So much so that we are clueless as to figuring a way out. To get rid of debt and start saving requires a strategy. And once we have our debt under control can we fully concentrate on saving.
Stop Making Debt
That is step number one. The quest is not to control debt but to start relieving it until eventually it is settled. This process cannot happen if you are making more debt. Block your account cards to prevent usage, stop using your credit cards and avoid small scale debt altogether: micro loans, opening clothing accounts, unnecessary subscriptions etc. The only acceptable form of debt is a home loan, student loan or business loan. Those are considered investments as the outcome is potentially rewarding.
Cash is King
A large part of the process of paying off your debt involves a dramatic change in your spending habits. Because credit is so easily accessible, as consumers we develop a habit of getting things we want on credit. The only way to break free from this habit is to change the way you spend. See to all your wants by paying cash, if you cannot afford it immediately then save up until you are able to purchase it. Only use credit in extreme emergencies that occur due to unforeseen circumstances whereby an unexpected expense needs to be taken care of and you have absolutely no other option.
Create a Debt Reducing Plan
Work out a strategy as to how you would settle your debt. Tackle one form of debt at a time. Start with an account with the lowest balance then work your way to the bigger account balances. If you are unable to settle your debt on your own, consider debt consolidation. By consolidating your debt you only pay one creditor at a reduced monthly instalment.
Now that you have changed your spending habits for the better and begun settling your debt, you find that you have more income at your disposal. The best way to make use of this extra money is to start saving on a much larger scale. Deposit the extra monthly income into various saving plans. Open up multiple savings accounts for various things you cannot afford straight away. In addition to this, set up and grow your emergency fund which is used to accommodate those unforeseen expenses in extreme emergencies.
For saving on a more long term basis, start investing. Investments are an ideal way to save for the future as savings plans are more commonly used for short term saving (1-5 years), while investments are meant to run for a couple of decades for real rewards. Retirement funds, education funds and various endowment policies. These funds are financially rewarding in the long run and financial experts strongly advise that people should start investing very early in their working careers to reap those rewards in the end.
Insurance is not saving in the traditional sense, but a lack of insurance can cost you thousands. It safeguards you and/or your family from financial strain in traumatizing events such as death, retrenchment or any other form of loss. Also make sure that your insurance is tailored to suit your needs to avoid being under insured.