There are few things in life more gratifying than knowing you don’t owe anybody. There is no mortgage on your home, it belongs solely to you. There is no financing on the vehicle you drive, you own it outright. I don’t know anyone who doesn’t desire to live this way. So how does one become debt free? That’s a question many people want to know the answer to.
In addition to being really motivated and willing to do the hard work, there are several factors that play into successfully getting out of debt. Below are what I consider to be the top 3 factors.
#1: Live a lifestyle that is comfortably within your means.
I can already sense the skepticism. You’re probably thinking, this is what you have for me Mr. Personal Finance man? You bet! I made this point number one, because it’s number one. As obvious as it sounds, millions of people still disregard this indiscriminate principle. Nothing will hinder you more financially than living above your means. It is mathematically impossible to make financial progress if there is nothing left over after you’ve paid all your bills.
Market forces encourage us to go big and refuse to settle for less, but it’s up to us to say no. Living below your means is an issue of personal responsibility, especially considering the lack of guardrails for preventing people from overspending. We’re living in an “everybody qualifies” financial culture. Institutions find ways to say yes when it means getting more of your money.
You cannot live a lifestyle that requires all of your income and still expect to accomplish financial objectives such as becoming debt free. The temptation to have it all now may be more appealing than sacrifice, but if you want to taste the sweetness of being debt free you have to be willing to live within your means. It is never too late to cut back on non-essentials and give yourself more breathing room.
#2: Find a way to make money outside of you regular occupation.
A good financial advisor will always recommend that you diversify your investments. I believe you should diversify your income as well. Diversified income provides additional resources to achieve financial goals such as becoming debt free. With the level of technology available and the long list of opportunities to earn money, there is no reason to rely on one stream of income. Even if you do consider that income to be substantial.
Most people base their lifestyles on how much money they make. It influences where we live, what we drive and the clothes we wear. In most cases, our financial obligations are relative to the amount of income we earn. This means the majority of our primary income is already leveraged with our regular living expenses. In order to successfully pay off significant amounts of debt, you will need additional income. The way to diversify your income is to think outside the box and find sustainable money-making opportunities that fit well with your lifestyle.
#3: You have to appreciate the value of living debt free.
The average person focuses more on the money they have coming in than they do on the money that’s going out. It’s great to earn a considerable income but what good is it if it all goes right back out? In my opinion there just isn’t enough emphasis placed on freeing up our income.
What if your paycheck was really YOUR money? Every payday you get to decide how you will use your money opposed to doling it out according to a list of financial obligations. Think of the benefits of using your income to create the life you want rather than simply maintaining the life you have. Think about being free to do the things you enjoy most without any financial stress.
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How much better would your life be if you had no debt?
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What would becoming debt free allow you to do that you are not doing right now?
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How would becoming debt free impact your family and friends?
Hopefully, your answers to these questions help you to appreciate the value of being debt free.
Conclusion
Deciding you want to live debt free and following through on it is not a simple task but it’s certainly possible. Success ultimately boils down to your level of commitment. It doesn’t matter what anybody else thinks. Yes, it will mean making real sacrifices right now in exchange for rewards later, but it is absolutely worth it. The freedom and peace that comes as a result are priceless.
If you are serious about becoming debt free, remember the three keys, live within your means, generate multiple streams of income, and genuinely value the benefits of being debt free.