August 9, 2021
6 Ways to Live Life Debt-Free
Debt is a prolific killer of financial health. It comes in many forms – credit cards, payday loans, property mortgages, car financing, etcetera. If approached carelessly, your debt can easily spiral out of control. Here are six ways to help you avoid the crippling effects of debt and live a financially secure and free life.
1. Live Within Your Means
It’s a timeless piece of advice that most people do not heed when making financial decisions. Most people rent apartments they can barely pay month after month. Or, they choose a lifestyle that consumes all of their monthly income and leaves them with no savings or investment capital. Live within, or better yet below, your means. Based on several rent-income calculators, you should not be paying more than 40% of your monthly income on rent.
2. Invest Your Savings
Let your money work for you by investing in dividend-paying stocks or yield-generating bonds. Other assets, like rental properties, are also a good source of passive income and can better grow your capital relative to the 2% interest that savings accounts pay.
3. Avoid Day Trading
Day trading should not be confused with investing. The latter involves taking sound financial positions that can grow your capital over time while the former is a form of price speculation on an underlying asset. Since day traders buy and sell assets more frequently with no real regard for their risk exposure or the asset’s valuation, the risk of losing a portion or all of their capital is high.
4. Set up Monthly Payments
Most, if not all, debt payments can now be automatically scheduled, making it easier for consumers to manage their debt and creditors to collect their money. Setting up an auto-pay option on your outstanding credit card and loan balances saves you time. More importantly, though, it helps you avoid any unwanted late charges and damage on your credit score.
5. Be Financially Prepared
Prepare for all worse-case scenarios that may befall you or your family. One hospital bill can financially cripple you for months. Being laid off from work can result in your house or car being seized by the bank. Have an emergency fund set aside in case you run into a financial emergency.
6. Start Organizing Your Finances Better
Debt is often a symptom of disorganized personal finances. If you have no idea how much money is coming in and going out each month, you’re likely making decisions that are detrimental to your financial well-being. Use the free financial resources and tools online, including debt management calculators, financial advice forums, and consultation services.
Ultimately, a debt-free life is well within anyone’s reach. Put your energy into increasing your income and decreasing your expenses. Look for side hustles that pay passive income, acquire new skills and specializations, and live a minimalist lifestyle that’s free of luxury purchases.