Getting out of debt should not be viewed as the impossible dream because anyone with a plan and commitment to financial freedom can get out of debt. The first step towards financial freedom is developing a financial freedom mindset. Spend time thinking about how great it will feel to be completely deficit free rather than worrying about paying next month’s minimum credit card payment.
Many people start to invest money prior to eliminating their deficits but this is not the best financial strategy because deficits limit one’s ability to achieve financial freedom. The best way to invest is to first invest in paying credit card balances off, auto loans, and even mortgage loans. But before paying credit cards off and other deficits start building an emergency fund.
Save five hundred to a thousand dollars and put the money into an emergency fund to be used to pay for an appliance or automotive repair so that the credit card is not the only source of emergency funds. Now, start to pay off the lowest debts first and then move onto the second lowest amount when the first is paid. This creates a positive energy force as one realizes that with effort he can start to pay off the deficit that was strangling his financial hopes and dreams.
Pay off the smallest deficit first by sending in more than the minimum payment but send in minimum payments on all other deficits. Once the first deficit is paid off start in on the next lowest and once that is paid off pay off the next lowest until all credit card deficits are paid off. Paying off deficits builds confidence and momentum which is opposite of what comes from a deficit mindset which is diffidence and stagnation.
After credit card debt and automotive debt is erased it is time to pay off the mortgage. Most people cannot contemplate the idea of paying off a thirty year mortgage because they see the loan as, what is called, a thirty year mortgage. But the truth is one need not take thirty years to pay off a thirty year loan.
Once all credit cards, car loans, and all other financial obligations including the house mortgage has been paid off it is time to invest. The best investment is a Roth IRA because the Roth offers several unique advantages that are not available in other plans. Save fifteen to twenty percent of annual income in a Roth for retirement.
Getting out of debt need not be an impossible task but it takes commitment and a detailed plan to eliminate deficits and financial obligations. Start by creating an emergency cash fund to be used in case of credit cards when an appliance or vehicle needs repair. Then start to pay off the lowest credit card balance and then move onto paying off the home mortgage.
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