How to Be Debt Free - 7 Tips For Freeing Up Your Money

Have you ever tried to think of a plan for how to be debt free? Do you even remember what it was like to be debt free?

Many people struggle every month to keep up with repayments on mounting debts. In order to make those payments, they end up working long hours and scrimping on the little luxuries they enjoy. There seems to be no time or money left over to do all the fun things.

Imagine being able to keep all of your income every week to do whatever you want. If you had no credit card payments, no personal loan payments, no rent payments or mortgage payments, you would effectively be able to do as you pleased with your income every week.

Once you learn how to be debt free, you'll be able to create a plan to change your life forever. Here's a basic guide to creating a debt reduction plan to help you become debt free fast.

Step One: Write down a list of all your current debts, from smallest to largest. List down how much you owe on each debt and how much your monthly repayment is for each of them. If you can find the statements for everything on the list, write down how much you're being charged in interest costs too.

Step Two: Add up all your monthly payments and look carefully at this figure. This is how much of your income you'll have left over to yourself every month once you become debt free.

It's important you think about what you'll do with that freed up cash once your debts are gone. Will you use it to build up savings or add to your retirement fund? Perhaps you'll put the extra cash towards an investment portfolio or maybe you'll cut back your hectic working hours to part time once you've learned how to be debt free.

Step Three: Go back to your list of debts and circle the smallest debt balance. For most people this is a credit card. You'll focus your debt reduction efforts on this particular debt first.

No matter what you're paying as your minimum payment on that credit card debt right now, try to find a little extra out of your budget each month to add on top of your current payment amount.

Step Four: Look carefully at your current monthly expenses and see where you can reduce spending anywhere. Any amount of money you can save should immediately be put towards your plans to become debt free.

See what else you can do to find some extra cash to put towards paying down your balances. As your debt balance is reduced, the amount of interest you're charged each month is also reduced.

Step Five: Stop using any more credit. If you're serious about learning how to be debt free, then it's important not to continue creating more debt. Cut up your credit cards.

Step Six: When you pay off your first debt on the list, immediately put the money you were paying on top of the repayments towards the next debt in line. Because you're paying so much extra off the balance, you should find the balance reducing faster and faster as time goes on. Repeat this step for as many debts as you have until they're gone.

Step Seven: Congratulate yourself for learning how to be debt free!