Over the past few weeks, we have been talking about investments and insurance, we also tackled emergency funds and its importance. While all of these are important, we can’t take away the fact that getting out of debt first before starting any investment should be your number one step.
The simple meaning behind this is that you don’t want to start investing in anything while you are still paying for something. You might end up withdrawing your investment prematurely resulting in more charges and expenses in the long run.
So, first, let’s get out of debt.
List
The first thing you have to do is list all your debts. This will help you see the whole picture clearly and help you be conscious that you have debts and that you should be clearing these first.
In your list, include the total amount, the interest, the minimum monthly payment. You can also add a column on the far right to represent your current budget based on your income, so you can determine how much you can pay for each debt.
Stop adding
Since you already have a clear picture of how much debt you have, you should concentrate on clearing that, before you add and incur more debts.
If you have a credit card, you may want to let a trusted friend keep the card, or you can even break it in two, this will force you not to have any more debts.
Commit
Once you have established your list and stopped making more debts, it is time to really take step 1 into paying it all off. Start on the nearest payday. Before you think of splurging and treating your family to a Jollibee meal, visit your list; if you spend your money in Jollibee, will you still be able to pay your monthly amortization for your debts?
If no, then you should postpone your Jollibee treat. If yes, think hard if you can postpone your Jollibee treat and just add the money to the debt payments.
Commit to this monthly, you’ll be surprised at how fast you will be able to pay off your debts.
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