“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.” – Ogden Nash. When debt is managed well, it is a stepping stone that enables us to improve our life and financially accomplish our goals. If not, debt can become a hurdle and hinder our progress rather allowing us to go forward.This independence month, let’s take a look at some of the ways in which one can get free from debt

Organize & Reorganize
First identify who you owe and how much you owe them. Tracking the debts and who you have borrowed from by maintaining a list or a spreadsheet, whichever you prefer, is a good way to constantly keep in check the debt situation you currently face. Don’t just create your list and forget about it, though. Refer to your debt list from time to time, especially as you start paying them off gradually. Keep an eye on it and review the list at least every 6 months to track your progress.

Higher Debts Go First
It is possible that you may have multiple loans or debts. In such a case, you might want to list down all your debts and rank them in a descending order of their interest rates and outstanding amounts. Then, focus on aggressively paying off the one that is on the top of that list. This doesn’t mean diverting all your money into repayment of that debt alone, but a higher proportion of your money should be diverted towards paying it off.

Pay on Time, Every Time
Simple things such as paying off all your bills on time go a long way in keeping you out of debt. You pay a penalty for every payment you miss. So, somehow late payments make it more difficult to pay off your debt. The more number of payments you miss, the higher the interest and finance charges increase. The more you delay payments they will only keep piling up. To avoid this, monitor the dates of payments. Set reminders and follow them religiously.

Good Loan, Bad Loan
When it comes to the term “loan”, chances are that everyone will associate it with a negative connotation. However, it may not always be the case. Some credit may actually be worthwhile the work put in to pay it off.

Good loan is something that creates assets over time. Loans taken for education, starting a new business or purchasing a new house, direct your money towards activities and assets which are likely to appreciate in value with time. Bad loans on the other hand are loans taken for spending money on depreciating assets. Loan’s such as car loans, credit card debt and personal loan, which are unlikely to produce returns for you in the long run, are classified as bad loans.

Look for Options to Pay off Debts Faster
If you get any kind of surplus, use it to close a loan as fast as you can. By paying off a significant amount of debt, if not all of it, by using a surplus amount that you may have received in form of bonus or allowance, will reduce the amount of debt to be repaid periodically, or may give you the option of reducing the tenure of remaining repayments.

Prepare Your Own Budget
“A budget is telling your money where to go instead of wondering where it went.” – John C Maxwell

Maintaining a budget can help you get a sense of your money, in real time. It helps in keeping a track of your expenses compared to your income. Setting a limit on expenses with respect to your income could help you keep your spending in control. If there are deviations, you may need to check your spending habits and adjust them accordingly. Smaller the deviations are, lesser is the need to undertake any form of debt. This activity can also help you in cutting down unnecessary expenses, once you realize the impact it has on your income.

“Debt is like any other trap, easy enough to get into, but hard enough to get out of.” – Henry Wheeler Shaw
Focus on paying off your debts on time and actively. Delaying payments will only cause unnecessary inconvenience in the worst of times. Before you feel the pinch, start paying off what you owe. If you pay your debts on time you can focus on living your life without the worry of living on borrowed money.