Make 2010 the Year to Becoming Debt Free

Imagine waking up one day having your utilities bills, your car payment, your credit cards and your mortgage fully paid. Just imagine the heavy weight lifted off your shoulders. It is nice to be debt free. You don’t just have to imagine it. Make it your resolution for 2010: Make 2010 the year to becoming debt free.

It’s not impossible to become debt free. All you need is a little discipline and a little management. You have to learn to properly manage your finances and you’ll be on the way to becoming debt free.

Below is a list of five ideas you can use to start on your road to becoming debt free.

1. Change your spending habit. What drove you to become deep in debt is your spending habit. You must know that if you spend more than you earn, you’re going to get into trouble. And when you find that your salary has depleted, you reach for your credit card. Bad move.

Of course, credit card companies want you to spend and spend and pay them later. They charge you exorbitant interest and they earn when you spend. Remember this. The money you spend when you use your credit card isn’t your money. It’s the credit card companies’ money and that means you’re borrowing money from them. And when you borrow money you have to pay it back or you’ll get into trouble.

First thing you need to do to change your spending habit is throw away all your credit cards. Don’t use them anymore. Cut them in two and throw them away. Only use cash. If you have no cash, don’t spend. This is so easy to say but can be hard to do. That is why you need all the discipline you can muster to change your spending habit.

2. Change your lifestyle. Next thing you need to change is your lifestyle. If you’re always dining out and watching movies, stop doing them. Eat at home. Watch television. Buy generic clothes. No more designer labels. Buy only what is essential. Remember only what you need and not what you think you want and must have.

3. Pay all your bills on time. When you get your paycheck, set aside an amount to pay all your fixed bills like your utilities, your rent, your car payment and so on. These are payments that you need to make every month. If you don’t pay them on time monthly, you’ll find them accumulated to such a staggering amount that you’ll be so stressed thinking about how to settle them.

4. Have a budget plan. Now that you’ve paid your fixed bills, you can start thinking about settling your debts. List down all your debts and arrange them from the smallest to the largest. Try to settle the smallest ones first and then tackle the bigger ones. In your budget you must set aside an amount for your own daily spending and the leftover can be used to settle your debts.

You might want to come to an agreement with your creditors about how to settle your debts. Once you’ve come to an agreement, make sure you follow through in a timely manner.

5. Savings. Don’t forget to put aside a little money for any emergencies. This amount doesn’t need to be big. You could maybe put aside about 5% from your paycheck to an emergency fund. This fund will help you in times when you’re in need of money urgently.

Changing your spending habits and your lifestyle is most important if you plan on becoming debt free. You also need to have a budget plan and a little savings set aside and don’t forget to pay all your fixed bills on time. Doing all these will hopefully make 2010 the year to becoming debt free.