How to Become Debt-Free: Strategies for Long-Term Success

It’s hard to avoid debt in America.

Consider these stats. 60% of students have college debt while the total outstanding student debt in the country is more than $1.4 trillion or approximately 7% of the total GDP.

Also, consider that the aggregate household debt balances are more than $1.8 trillion with mortgage balances standing at $8.6 trillion. Also, believe that Americans have the highest credit card debt in history and most of them are struggling to pay it.

So, while we all hate being in debt, it is increasingly becoming difficult to live a satisfying life without accumulating some.
In this article, I explain a few simple steps you can take to becoming debt free.

Attend a Good but Less Expensive College

Most students want to attend ivy-league universities like Harvard, Stanford, and Yale. This is because these universities tend to produce some of the leading professionals in the country. For example, Barrack Obama attended Harvard University, while Trump attended Wharton School of Finance and Mark Zuckerberg attended Harvard.

Harvard has produced 48 Nobel Laureates, 32 heads of states, and 48 Pulitzer award winners.

However, these universities are expensive. For example, the average annual fees for attending Yale University is more than $70,000 while that of Stanford is more than $60,000.

To avoid getting into all this debt, I recommend that you find suitable universities that charge reasonable fees. And there are many. Furthermore, in most careers, the college you attend does not matter.

Alternatively, when you enroll in an ivy-league university, I recommend that you find academic financing aid. In Harvard, more than 50% of students get financial aid. Give it a try.

Create a Financial Plan and Stick with It

Living a life without a financial plan is dangerous.

A financial plan is a simple document that looks at the amount of money coming in and how it should be spent.

An excellent way to start is allocating money to your fixed expenditures which have to be paid every month. These include cable and internet charges, electricity charges, transport, insurance, food, and mortgage or rent.

After deducting all these expenditures, you should save and invest some money, and the amount that remains, you should spend it carefully.

As a rule, avoid buying expensive things that are not necessary. For example, do you need a $10,000 sofa?

Please remember:

A financial plan is not meant to make your life boring. In fact, as you budget, ensure that some of the money goes to fun things like dinners and galas.

Also, use applications like Mint to track your spending.

Start Saving Early

The month you start earning, ensure that you open a savings account with a high APY to start saving. Each month, direct some of your funds to this account.

The early you start saving, the better it will be for you once you retire. For example, if you start working at 25 years and you decide to save $100 every month, by the time you retire at 65, your savings account will have about $48,000. When you add interest, this figure could go up to more than $60,000.

On the other hand, a person who starts saving the same amount at 35 years, on retirement, he will have just $36,000.

Making such savings, that doesn’t impact your life, will help you avoid getting into debt on retirement.

Live Within Your Means

A common mistake many people make is when they live outside their means. For example, you will see a person earning less than $60,000 per year driving a $66,000 Range Rover and living in a $4,700 a month apartment.

Since the person’s salary cannot accommodate this luxurious lifestyle, he will end up borrowing and not saving.

On the other hand, if such a person opted for a $20,000 car and a small, affordable apartment, he will end up saving more and avoiding debt.

In fact, the latter person will be happier than the person living a luxurious lifestyle he can’t afford.

Think of Debt Consolidation

If you have multiple debts, I recommend that you do debt consolidation. This is where you combine all your unsecured loans like payday loans, credit cards, and medical bills into one. So, instead of paying five creditors every month, you will be paying one.

Debt consolidation helps you lower your interest rates, lower your monthly payments, protect your credit score, and getting you out of your debt faster.

If you don’t understand a lot about debt consolidation, you can get these services from the Better Business Bureau or other providers. You can read FTC’s guide on how to select a suitable counselor here.

Get a Side Gig

Finally, if you have one job, I recommend that you consider having a side job. Fortunately, these side gigs are plenty in America.
For example, if you drive to work, you can enroll to Uber and carry a passenger every day on your way to work and back. This can give you a free income of about $100 every day. Also, during your off days, you can enroll with Angie’s List and help people with errands. Every month, this can give you about $400. Also, if you have a spare room, you can rent it out in Airbnb which can give you another $500.

Therefore, by doing such simple work that doesn’t necessarily affect your life, you can make good money which can go towards paying your existing debt or savings.

Final Thoughts

Debt is terrible and managing it is even harder. In fact, it has caused many people to commit suicide. But, by following the simple strategies I have outlined, it is possible for you to stay out of debt. The rule of the thumb is to have a financial plan and sticking with it. Also, living within your means will help you avoid the temptation of overspending money you don’t have in the first place.