Money Examiners Five Steps to Get Out of Debt
The most popular steps to financial freedom are debt repayment methods to pay off the debt in the order of the highest interest rate obligations to the lowest interest rate debts.
The most effective, repayment method is known as “The Debt Snowball Effect,” which is paying off debts in order of smallest to largest regardless of the interest rate. The Snowball Effect is the most popular debt free elimination method. Living a debt-free existence allows freedom to experience many things without the strings of financial stress. Imagine taking vacations and living without economic pressure.
Living a higher quality of life with Money Examiners Five Steps to get out of debt
These are the Money Examiners’ Five Steps to get out of debt and on the road to financial freedom.
1 – Begin by starting an emergency fund with at least a $1,000.00 in the bank.
The emergency fund is utilized for life’s unexpected events like car repairs, medical bills or for that refrigerator on its last leg to be replaced. A small emergency fund is meant to give you and your family peace of mind for all of those unexpected emergencies.
2 – The next step on your journey to financial freedom encourages you to begin by paying off your smallest debt first regardless of interest rates.
Using the Debt Snowball Effect you should begin seeing small victories first as debts are paid off with the ultimate goal of finally paying off your mortgage.
3 – The third step encourages consumers to save three to six months income to live on as an emergency fund to cover daily living expenses. The minimum that you should save is at least three months of living expenses.
4 – Many financial planners recommend investing at least 15% of your annual take home household income into a Roth IRA or a 401K retirement plan.
However, it doesn’t necessarily have to be 15 percent invested as a 401K or Roth retirement plan. These funds can also be invested in real estate, but any property should be clear of additional liens so the money can be accessed in case of a major emergency more quickly than property with a mortgage. In the new economy, many households choose to keep the money for this investment in cash, especially considering what the financial crisis did to many 401ks.
5 – The final step on your journey to financial freedom is paying off your home mortgage with larger installments on a monthly basis.
The typical mortgage is for 30 years, but many consumers are opting for 15 year mortgages to pay off their homes more rapidly. Paying off a home loan allows homeowners to become financially solvent and more confident. Writing that last check for a home mortgage to your bank is one of the biggest reliefs that anyone can have to become debt free.
Author Jennifer Wetter is a contributor to Money Examiners.com
Who are the Money Examiners?
The Money Examiners are a team of journalists, and experts in stocks, bonds, real estate, money management, personal finance, and banking dedicating to helping consumers better navigate the dangerous world of finance.