How To Become Debt Free

1. FIND OUT WHERE THE DEBT ARE FROM.

If you are in debt, you can't afford to be an ostrich. Don't bury your head in the sand and give up. Immediately, right now, you've got to figure out how much money you owe so you can form a plan for getting out of the hole and getting on with your life. Get realistic and crunch some numbers. Get a number on the table and face it.

2. PRIORITISE YOUR HIGHEST INTEREST DEBTS.

you've got the raw data, it's important to look a little closer. Which debts/loans have the highest percentage of interest?

3. DEVICE MEANS OF PAYING DOWN YOUR DEBTS.

Review your finances thoroughly, crunch the numbers, and see which method of making payments will be the most effective for your situation. Work on paying down the debt with the highest interest first, while making minimal payments on everything else. This is sometimes called "laddering" your debt, and helps the borrower feel more actively in control of the debts. If the interest rates are similar for your debts, pay off the one with the lowest balance first. This is sometimes called "reverse laddering", which allows you see your progress faster, and will make you feel good after each smaller debt is payed off.

4. TALK TO A FINANCIAL ADVISOR ABOUT CONSOLIDATING YOUR DEBTS.

You don't have to go about this alone. Loan paperwork is notoriously complex. Find a financial advisor that you can trust and talk about consolidating the loans into a more manageable single payment each month, to make it easier to pay down your debt.

5. CREATE A STRICT BUDGET.

Doing the math necessary to live within your means isn't as complicated as it might seem. Here goes: Add up what you make every month, then add up your necessary expenses every month. Your necessary expenses include food, rent or mortgage payments, bills, and transportation. Balance the amount of money that goes into each category of your necessary expenses to try and get as much as possible of your income into the loan payment category, so you can pay down your loans more quickly. Stick to this budget. If the outgoing funds are more than the incoming funds, you've got some work to do. Obviously, you've got to either cut some unnecessary expenses or make more money (click here and go through the blog archive).

6. SAVE MONEY FROM YOUR MONTHLY INCOME.