Statistics shows that over eighty five percent of the whole American populace are in one form of debt or another, and some people don’t even get to pay off the debt until their death.
Being in debt can be a distracting and stressful situation as your debtors will keep you on your toes all day to remind you of your various debts. And if you used any of your valuable property to collect the loan as a collateral, you stand the risk of loosing such property if don’t pay your debts as at when due.
The best way out of this situation is to avoid getting into debt in the first place, but you find out that most times that these debts are inevitable. Another sad truth is that each of us have at one time or the other set a goal of how to get out of debt but it seem the more out of debt goals we set, the more we find ourselves in big debts.
In this article, I will mention reasons why people get in debt, how you can achieve your goal of getting out of debts and how you can finally be financially free.
4 Reasons Why People Get into Debt
- Unavoidable Circumstances-: There are some situations where getting into debt becomes inevitable and most time, we don’t have control of such circumstances. Circumstances like college debts, divorce settlement and medical expenses without insurance are some examples of unavoidable circumstances.
- Spending Above Your Income Means-: Living above your income means and using your credit card to its limits is one sure way to get into debts.
- Poor Saving Habits-: This reason is almost similar to that of spending above your income means. The difference here is that as you aren’t spending above your income limit, you still don’t have a savings and if any emergency occurs for cash, you borrow from any available source, which still keeps you indebted. Poor savings habit is usually caused by mismanagement of your income.
- Gambling-: Many people are into debt because of their gambling habit. Gambling is like an addiction, if not brought under control can ruin the gambler’s financial life. Whether it is casino gambling, sports betting, or any other colourful name it may be, gambling is a sure ticket to get into debts.
What is Financial Freedom?
Financial freedom also known as financial independence; is the ability to have enough finances to sustain you without taking on debt, even when you don’t work. Working after you attain financial freedom is just because you don’t want to do something that can keep you busy and not stay idle.
It is a known fact that the lines of becoming debt free and financial freedom are parallel. You would only be a fool if you work on becoming debt free without pushing the limits and attaining financial freedom. This is why i am stressing the two subjects (becoming debt free and attaining financial freedom) in this article.
Apart from people that inherited their wealth from dead relatives, attaining the status of financial freedom requires a lot of sacrifice, hard work and financial input to make it achievable. Over 85% of people leave this world without ever reaching financial independence; this shows that the status of financial freedom isn’t something you get while being lazy.
4 Reasons Why You Need To Be Financial Free
You derive the following benefits from becoming financially free:
- Makes You Become Your Own Boss-: When you become financially free, you become your own boss. Only employees that have worked under bad bosses that will understand the satisfactory feeling you get from becoming your own boss.
- Gives You Free Time to Spend on Other Things-: When you become financially free, you have enough time you spend time with your family and get to do other things you have long to do, like going for vacation.
- Freedom from Monetary Worries-: To me, this is the best benefit you get from becoming financially free. You are free from monetary worries like debts or other monetary worries. Some people may not believe it, but if you become financially free, you get to pay lower taxes, there are a lot of taxes you will exempted from especially if you are running a company that is giving a lot of people job employment.
- You Retire Well-: You will be free to retire anytime you wish when you become financially free and when you are ready to retire, you do so without worries.
How to Achieve Your Goal to Get Out Of Debt in 1 Year
1. Make a List of the Total Amount of Money You Owe in Debt-: Getting out of debt starts with you making a full list of all the debts you owe, even the very minor ones that don’t seem to matter; calculate them all and know the total amount. Getting a specific amount will help make your goal tangible, attainable and motivate you to achieve the goal.
2. Set a Goal of How You Wish to Pay Off the Debt-: After you have gotten a specific figure of how much you owe in debts, it time to set a game plan on how you will go about paying it off. For instance, if you owe a college debt of $35,000, you can set a goal to pay $350 or more monthly to service the debt. Remember that the goal should be attainable so that it will not over whelm you in the long run or affect your finances generally.
3. Have a Clear Means of Income-: For you to achieve your goal of getting out of debts, you need to have a clear means of getting constant income. Trying to get out of debt when you are unemployed or under employed can be frustrating. If you are yet to get a good paying job, you can take extra classes to get knowledge about a different career. Let’s still take for instance, you majored in marketing in college and graduated without a job, you can take up real estate classes to acquire a license to work as a realtor or you can join a direct sales company that pay in percentage in accordance to sales made.
4. Minimize Your Spending-: Reduce the extra money you spend on items you don’t need. The first thing I had to do when I began working towards my goal to get out of debt was to ask myself before I make any purchase if the item was important. If the answer is a yes, the next question I asked myself was if I could do without the item for the main time. If the answer is a yes, then I will drop the item. This left me with extra money to service my debt each month.
5. Find a Side Investment to Make Money–: Even if you have a full time employment, you should start a side investment or business that can get you an extra cash to pay off your debts faster. For instance, if you are good with writing contents, you can start a blog that you can spend one hour each day to update and sell other people’s products when you have gotten a list of regular visitors. You can also start a mail order business where people call your home to order for products you have in sort which you send to them via mail, or take up freelance jobs on the internet as a part time gig.
6. Stick to Your Goal-: It requires a lot of discipline to stick to your goal of getting out of debt, and you may find yourself on few occasions doing the opposite, but you don’t have to get depressed and continue wallowing in self pity. Have the discipline to continue from where ever you missed it and work towards your goal. Also, having a clear picture on your mind of what your life will look like after you pay off the debts can motivate you to work towards achieving the goal.
How to Achieve your Goal to be Financially FREE in 1 Year
a. Acquire the Necessary Entrepreneurial and Financial Education-: The first step towards attaining financial independence is by getting all the information you need on entrepreneurship, financial management and investment skills. There are a lot of such courses online or offline. Or you can buy books written by very successful authors that have attained financial independence themselves, and take the time to assimilate the principles of financial wealth written in them. You can also listen to audio books by successful authors in your spare time to get you motivated.
b. Set Realistic Financial Goal-: The next step to achieving financial independent is to set your précised and realistic goal; setting a goal to make ten million dollars within one year when your current income is less than $3000 a month is kind of unrealistic. One thing with unrealistic goals is that your mind sees them as huge, and chances of achieving it are slim. And when you can’t achieve the goal within the stipulated time, you may feel like a failure and become unwilling to set new goals in the future. Your goals should also be flexible enough to be adjusted if necessary in the future.
c. Have the Right Mindset-: If you don’t have the right mindset, no matter how perfect your goal of attaining financial independence may look like, you may not be able to work towards it. The right mindset starts with believe in yourself that the goal you set is achievable and if you work towards it, you will definitely achieve financial freedom. One way to spur yourself and keep the motivation is to visualize what your life will look like when you attain the goal of financial freedom; this simple act will keep you motivated even when the going gets tough.
d. Take Little Action Steps Each Day Towards Your Goal-: Each day, you should be taking actions that will help you achieve your greater goal of becoming financially free. For instance, if your goal is to achieve financial freedom through joining a multi level marketing, then you can take little steps like taking one or two people for launch coffee break each day to tell them about the company you work for and what they stand to benefit from joining the networking company under you. You can also conduct weekend seminars, invite friends and colleagues and introduce them to multi level marketing business; that will be aside the steps you take daily to sell your products.
e. Work out a System-: Guess you have heard the saying that you cannot achieve financial freedom by working for someone else. What they are just trying to say is that, if you are working for a person, you get paid according to time invested but if you can workout a system where you make money even when your time isn’t being counted, then you are near attaining your financial independence.
For example, for example, where you are working, you are paid $50 per hour; if you work ten hours daily, that gives you $500. Even if you work for the whole 24 hours a day, you cannot make more than $1200 that day. If you can be able to break this chain and workout a system where you can continue to make money even while you are not working, then you will be able to become financial freedom fast. I will discuss few business ideas that can let you make money while you aren’t working later in this article.
f. Reduce Your Spending-: If you can reduce your spending, you can save more and invest more.
g. Invest and Reduce your Expenses-: As money starts coming, it is not the time to start buying that sport car you have been dreaming of or packing into the 10,000 square feet house, its time to invest and reinvest. Some financial gurus says that it is when your investment’s investments start bringing you returns that you know that you have attained financial freedom.
Simple Business Ideas That Can Fetch Passive Income
- Royalties from publishing of books.
- Investing in stock and municipal bonds
- Blogging and launching information products online