Debt FreedomDebt-freedom is the mantra of many baby boomers about to retire. They have worked all of their lives to pay for the house. They have to pay for the car and to pay to get their kids through school. Then there are the various adult toys that they have collected. These include everything from cottages, sports vehicles, fancy cars and all of the electronics that money can buy. Now they are focusing on eliminating debt or reducing it as much as possible prior to retirement so they can live on a reduced retirement income.

Non baby boomers and first time home buyers are also aiming for debt freedom, paying off mortgages more quickly than needed and doing without so they can focus on reducing debt and saving the interest that they pay on this debt. Since 2008, interest rates have been at historic lows, but they are about to rise again in 2013 and 2014. This is the time to reduce your debt before interest rates go up. Debt freedom is important to many people who have either learned a hard lesson over the past two years or who have watched friends and relatives lose their homes and cars.

Debt Freedom – How Are They Doing That

Well the answer is that it varies, however for many of them it starts with setting a budget to try to keep their debts under control, and setting money aside to pay for any outstanding loans and mortgages.

It also starts by avoiding purchases in the first place that will increase your debt or make it more difficult to pay off existing debt.  Ask yourself if you really need the item, can you do without it , is there another cheaper alternative?

With all that has occurred over the past 2 years, the stock market crash, the foreclosed homes and more on the way, more and more people are aiming to decrease their debt. They are worried about the exposure they might have if they lose their jobs or if interest rates increase.

It starts with setting budgets for holiday spending, vacation activities and everyday expenses. Shaving some of the extras off your day to day expenses can save a great deal of money which you can use to reduce your debt. Budgets are difficult to keep, many people break them and some people will even spend more money than what they planned. Some folks are doing without vacations for their family.

Commitment is Key

The first step is to set up a budget and is a good start. However sticking with it requires commitment and perseverance.

There are ways to increase the level of commitment and some of the rules are the same as any other activity that takes commitment:

  • Set a budget per gift recipient
  • Write down your purchases
  • Keep track of daily expenditures
  • Make sure you and your spouse are equally committed
  • Set a budget that is realistic
  • Identify specific monthly expenditures that can be reduced or cut
  • Set up targets for your debt reduction
  • Discuss expenditures with your spouse or friend before purchasing
  • Wait a day or a week to think about purchases, maybe you really do not need  the item after all

Debt-free target

Setting targets for your credit card payments, car loan payments and any other debts you have will help you go a long way to managing your debt. If at all possible cut up your cards and pay with cash. Pay for the things you need and do without the things you want. Use credit cards responsibly. Avoid high interest rate cards and pay off your cards balance at the end of each month.

Reduce your debt on the highest interest debt first to maximize your savings and make more money available to reduce your debt. If you can transfer high interest debt to low interest debt do so as quickly as possible. Use the savings to reduce your debt. Never use the savings to buy more things that you really do not need.

Debt freedom is an enviable target and objective and kudoo’s to those that achieve it. There is a certain amount of freedom an euphoria when it happens to you, enjoy it, you worked hard for it.

Comments and ideas about achieving debt freedom are welcome. Our readers are looking for ways to achieve this objective.

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