How You Can Avoid Debt Traps & Enjoy Financial Freedom

How You Can Avoid Debt Traps & Enjoy Financial Freedom

By TLB Project Contributing Financial Writer: Eric

Today, a huge portion of the American population is saddled with debts. While credit is not a bad thing in itself, it can wreak havoc on your life if it’s not used judiciously. Unfortunately, most Americans rely on credit cards as well as other forms of debts to cater for daily expenses.

Attaining financial freedom is something that most people dream of but it’s not easy to achieve when you are struggling with debts. When the economy is slowing down, it’s quite easy to get into cyclic debt that will sabotage your financial freedom. However, you can avoid the traps and enjoy a better life. In this article, you’ll learn about some ways of avoiding debt traps to safeguard your future.

Plan for your financial freedom

The basic step towards a better financial future is getting involved in making actionable plans about your future as opposed to living for the present moment only. When you are too busy going after luxuries and pleasures of the day, it’s highly likely that you won’t have enough time and resources to cater for your future.

Because there are tons of opportunities to use your money, it’s very easy to fall into the trap of extravagant. More often than not, a lot of people are hooked on their destructive lifestyles and it’s not easy to plan for the future. But you can still have fun at the present and create a good plan for the time to come.

Take some time to consider your financial goals, needs and wants. To achieve the goals, you need to learn how to suspend some of the wants so that you can work out the financial goals. While this isn’t a walk in the park, you only need to remind yourself of the joy that comes with financial independence.

Increase your earnings

Without a committed savings plan, it’s not very easy to grasp your financial freedom. While this isn’t something that most people enjoy discussing, a commitment to always keep your expenses below your earnings is vital. The amount you earn doesn’t matter because if you can’t control your spending, money will always be elusive.

Before you start saving, you must understand where the cash is spent. A great way to getting this insight is making a habit of tracking your expenses. The moment you know where the money is going, it becomes easy to categorize the expenses and you can therefore eliminate or minimize the budget busters.

Since we are living in the information age, it’s pretty easy to get an extra stream of income that will help you deal with cash flow problems. To illustrate, you can start selling some stuff on the online platforms like Amazon. Alternatively, you could offer your skills in any area and earn an extra income. If you are not into online gigs, perhaps you could get an additional part-time job to boost your income.

Start eliminating your debts

While it is normal to use loans, most Americans run into the ugly financial hiccups associated with credit. All this happens when the borrowing decision was not well thought or when you overestimate your capacity to service the loans.

Nevertheless, having debts is not a death sentence if you are willing to take action to improve your situation. Regardless of your income, it’s quite possible to clear all your debts and enjoy the accruing freedom.

The truth is that you don’t have to keep paying expensive debts over a long period. With vast financial products available today, you can get a debt consolidation loan that will help you deal with your bad credit cash loans. This works well if you have several loans with high interest rates and the creditor will pay them for you and you are left to deal with just one loan. The beauty of this arrangement is that you get the loan at a lower rate than you would be paying for the original loan.

In your budget, you should have a sizable amount allocated to debt payment. But this doesn’t mean that you should start spending the allocation on other things once you have cleared the debts. Make an effort to dedicate the cash towards items that will improve your financial status.

Invest your money

If you rely on savings alone, chances are that your journey to financial freedom will be taking longer than you have imagined. However, most financial experts understand that saving is very important as far as financial freedom is concerned. This is because it helps you create a habit of making the most out of your dollar every time.

The money you’ve saved should start growing as soon as possible since keeping the cash in your account doesn’t add any value to your finances. Besides, inflation can be quite frustrating when you have lots of liquid cash. On the other hand, investing keeps you safe from unforeseen inflation and you can be certain that your financial profile will get better with time.

Nevertheless, making an investment shouldn’t be rushed since there are some risks involved. If you invest in the wrong places, you are risking your cash. As such, you need to carefully consider your options before making a decision. Basically, it’s always wise to consult an expert if you feel that your knowledge is not sufficient to make the right decision.

Stick to better spending habits

By the time you are making progress in your debt recovery journey, it’s likely that you have developed better money habits. Spending money for the sole purpose of impressing your peers can be quite dangerous and it’s one of the habits that can be difficult to break.

Since you’ve worked very hard to form healthy money habits, it would be good if you maintained them. Of course, this is not meant to be an easy task but it’s achievable when you have the will. But this doesn’t mean that you should become mean to your family or yourself. Once in a while, you can give your loved ones a treat they will enjoy.

Final words

If you are deep in debt, breaking free is within your grasp. However, you have to create a plan that will get you to a better financial future. With this, your commitment to the plan will determine how fast you will improve your circumstances. After dealing with the debts, you will have a set of skills that will help you stay free and create more wealth.

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