Getting out of debt and having the financial freedom to live the way you want has become the new American dream for a generation that has become addicted to debt. For generations, according to the Bureau of Economic Analysis, Americans saved, reaching a pinnacle in the mid-1970s as families saved at a rate of 14 percent. However, in the time period between 1995 and 2010, the personal savings rate dropped to 3.4 percent as Americans became hooked on debt. Elimination of debt and finding financial freedom is not easy, but there are ways to rid yourself out of damaging debt.
Paying Down Credit Cards
Credit card debt, especially high-interest credit card debt, arguably is one of the biggest barriers to financial freedom. Paying the minimum on a revolving balance of credit can take a lifetime to pay down while piling up thousands of dollars in debt. Finding a method to eliminate credit card debt should be a major priority, unfortunately, there is no secret formula. Mathematically, however, you can find your way out of debt by applying a maximum payment to a single card at a time. You can either start with the lowest balance or the highest interest rate card first, and work your way through the debt balance, paying off one card at a time until you have eventually paid off your debt. This method takes patience and fortitude, but you will eliminate your debt.
Save
According to the Bureau of Economic Analysis, personal saving rates dropped nearly 11 percent from 1959, with Americans having a savings rate as high as 14 percent in the 1970s, through 2010, in which Americans had a savings rate at a low of 3.4 percent. With the decline in personal savings rates, more Americans relied on debt as they continued to spend freely. To find financial freedom beyond your next paycheck, though, you'll need to reverse that trend in your own life and look toward savings. According to focusonthefamily.com, saving is one of the best habits you can adopt. Even if you are in debt, saving just a few dollars a week can add up. Having strong savings can help eliminate the need to spend with plastic and help build the foundation for financial freedom as you become less reliant on credit and more in control of how you spend your money.
Change Your Spending Habits
Consider how you got yourself in debt. If your debt is not from a financial crisis, such as losing a job or from such unforeseen events as an expense from an unexpected illness then you can make a difference in getting out of debt. Start with examining your spending habits. According to an article on Oprah.com, a foundation to developing a spending plan starts with tracking every penny you spend, even on such trivial items as coffees and vending machine spends. Look for waste or unnecessary expenses and start cutting back. Create a family budget that is reasonable for you but also allows you to pay down debt and save for the future.
Change Your Lifestyle
Sometimes becoming debt free and finding financial freedom requires a drastic change in your lifestyle. Perhaps you will need to make a change in your living arrangements, down sizing to a smaller home, moving closer to work to avoid costly commutes, or moving from an area with a high cost of living to a place that is less expensive. Perhaps you'll want to trade in your high-end vehicle for something more economical or make a choice to live a simpler life. Changing your lifestyle might be painful and difficult but can buy you the debt-free lifestyle you desire.
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