How to Get Out of Debt and Start Saving

Posted by Grace under Personal Finance on February 25, 2015

Learn how to get out of debt and start saving money for your future. The third part of how to invest money series of topics. Today, we will talk about getting out of debt. Why it is important to get out of debt before investing your money? Think about this, would you rather ride in a boat with different direction? You want to increase your assets, right?You will become more confident and become focus in investing your money when you have no debt to think about. Besides, what’s the sense of investing if all your earned profits will only use to pay all your debts. If that’s the situation, you are just wasting your time. Unless, you have a good debt. Wherein, the borrowed money is making money. A bad debt on the other hand, are those type of debts that will only considered as lifetime liabilities.Before we continue in this guide, please review the first and second part of how to invest money;

Part 1: Reasons of Investing Money
Part 2: Millionaire’s Money Mindset


How to Get Out of Debt and Start Saving

You must lessen your debts, much better if you can remove all your debts and change them into assets. Having a lot of debt can bring you a lot of financial trouble. To lessen your debt, you must pay the small debts first then followed by the big ones. You much pay the debts first that has high loan interest rate than those debts that has no interest.

Learn how to lessen your debt or totally get out of debt using effective money management principle.

Get Out of Debt | Photo Credit: Images Money CC 2.0

Prioritize Your Needs

Beginning today, do not get into impulse buying. Just buy the things you really need. Prioritizing your needs can help you to get out of debt and help you how to spend your money wisely. Budgeting has a big goal for this one. When making a budget, you have to decide how much money to spend each item. Organize and itemize the products you really need.

Avoid Credit Cards

If you can’t avoid credit cards, you must at least know how to use credit card with disciplined. A credit card has its own advantages and disadvantages depending on the credit card holder. When applying for a credit card, it is advisable to get those type of credit card that has no annual fees, (or low annual fees), those credit cards with rewards points to maximize their benefits and those credit card that has low monthly charge.

Manage Your Finances

You have to learn how to manage your finances. Aside from budgeting, you must know how to save and invest money. Managing your own finances is very easy. Every time you received your salary or business profits. Just cut them into 5. A large percentage for necessities, maybe 60% of your income and the rest are both 10%.

  • Savings and Investment Funds – a money to set aside for your financial future.
  • Giving and Donating Funds – a money use when attending church worship services.
  • Necessities Funds – money use to buy all your needs.
  • Recreations Funds – money use to enjoy life (movie, food, travel, etc.)
  • Education Funds – money use to educate yourself personal finance (seminars, books)

Think Prosperity

You have to follow the law of attraction, if you always think debt, you will always get debt. If you always think prosperity, you will get prosperity. It is recommended to read the book of Rhonda Byrne, “The Secret”, there is a chapter entitled “the secret to money”, wherein it can teach you how to attract wealth.

In our next topic, the part 4 of how to invest money series will be related to emergency funds. Know the importance and advantages of emergency funds. Why should you build emergency funds first before investing your money.

As a guide and continuation, have time to read “How to Invest Money? Part 4: Building Emergency Funds”

Learning on how to get out of debts and start saving money will be easy if you are following the basic principles of personal finance. You don’t need to be an accountant or a financial expert before you invest your money. All you need is proper knowledge and willingness to learn investing.

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