Debt paralyzes you and inhibits your ability to make progress in every aspect of your life. It suppresses all your financial plans on the ground. Worse is when you are living from paycheque to paycheque and a series of unfortunate events strikes, a sudden job loss, a serious illness or an untimely emergency happens.
Such times make you aware that a healthy financial debt-free lifestyle is precious. Taking charge of your finances is the most that one can do for themselves irrespective of whether you an entrepreneur or an aspiring entrepreneur.
Becoming debt-free is not an easy road, neither is it an unavoidable route if indeed you want to take control of their lives and their futures.
Below are the most practical tactics and ways anyone can take towards becoming debt-free.
Tactic 1: Create a Budget
When you fail to plan, you plan to fail. You cannot get out of debt lest you figure out your expenses. And this involves planning how you are going to spend your income on writing down a strict budget. A budget will allow you to map out your financial plan in whatever period you would like.
The budget will help you separate your needs and wants. Basic needs include rent and utilities, transport costs, food, and clothing. Anything else is a want. A budget will also allow you to prioritize the loans to be paid early enough.
Tactic 2: Live a Frugal Life
If you want to start your debt-free journey, you‘ll have to cut your expenses aggressively and redirect them into loan repayments and setting up an emergency fund.
Living a frugal life means that you will need to slash the non-essential expenses like Pay Tv, reduce on outside dinners and lunch and carry packed lunch at work and anything else you can actually survive without.
Doing this will allow you to create another pool of free cash flow that can always be redirected to paying your debts faster.
Tactic 3: Start a Side Hustle
Having an additional source of income will amplify your efforts towards becoming debt-free. In our previous article, we highlighted some of the business ideas you can easily start by leveraging your skillsets and talents.
Photography, blogging, accounting, tutoring are among some of the businesses you can start on the side that will boost your effort by creating additional cash towards debt repayments. You can also visit sites like Kuhustle.com where you will find ways of making extra cash as a freelancer.
Tactic 4: Negotiate Your Debts
Negotiating your debts allows you to come up with a flexible payment schedule that will not affect your day to day life. You can always negotiate with your debt collector to either make lower payments per every payment or flexible instalments or even discounted interest rates.
Tactic 5: Change Your Behaviour
Why did you go into debt in the first place? For you to become debt-free, there has to be a change in your attitude which affects your behaviour. You have to learn how to spend what you already have before earning more. If you don’t know to spend Kshs 10,000 (US$100), Kshs 50,000 (US$500) will not be of help.
Don’t buy things you can’t afford because ultimately, you will fall into debt. Spend less than you earn and live within your means. This process will need you to put a lot of sacrifices and practising delayed gratification.
Last Tip: Becoming debt-free is usually an ongoing process and you can always hasten your debt payments by making it a habit to put all bonuses (any money that is not your monthly income) towards your debt.