08 May Steps to Get Out of Debt and Buy a Home
Just like purchasing a high-end car, buying a home is considered a notable hallmark of success in today’s modern culture. Nonetheless, first-time home buyers are faced with a myriad of challenges that range from not having sufficient capital for the down payment to wallowing in the murky waters of consumer debt. Unfortunately, there’s no other way around this other than by improving one’s spending habits with the intention to save more money in the long run. And here’s a quick primer on how you can do that.
1. Refrain from Growing your Debt
The first step to saving cash for that crucial initial deposit is doing away with all debt sinkholes. So cancel all additional credit cards; use your debit instead. This will teach you the discipline of earning before spending.
2. Account for your Spending Habits
Where does your hard-earned money go? Take an inventory of all the recurring bills and expenditure that you have to settle every month or year and budget for them accordingly. Strike off the unnecessary ones or substitute them with cheaper alternatives.
3. Settle the Biggest/Most Expensive Debts First
The more time you spend with an expensive debt/loan, the more additional money you’re likely to shell out in the long run. Start servicing your biggest loan as soon as possible while being careful not to pick up another one.
4. Cut Back on your Expenses
Do you know that 70% of the things we religiously spend money on every month are unnecessary and over-rated items of luxury? For instance, you don’t need to buy that $200 designer pair of jeans when you can get almost the same quality and functionality from a $20 pair from the nearest thrift shop. Be smart about how you spend your money and prioritize ‘paying yourself first.’
5. Start, Build and Grow an Emergency Fund
It surprising how a majority of people fancy spending or investing their money to the last cent without stashing away a chunk of it for emergency purposes. Don’t be one of them; life is anything else but predictable.
6. Scour for the Lowest Interest Rates
Ask for a better interest rate from your credit card issuer or drop their card for one with a lower rate. You can later transfer your balance to the new one instead of paying huge wads of cash every month to settle your credit card debt.
7. Document and Track your Progress
So you have managed to save $1500 over the last three months? Good, don’t just stop there, acknowledge the milestone and use as a motivation to try harder, save more money and eventually dropping all unnecessary spending habits.
8. Continue to Service your Debts Without Adding a New One to the Reducing Pile
One of the most common mistakes most people make is picking a new loan/source of debt as soon as they are done clearing another one. This never-ending misery cycle is what prevents most of us from ever tasting the sweetness of true financial freedom.