From Rags To Riches: Converting Your Debt Into Wealth

For any general person being drowned in debt is a pretty fearful experience. Debt is generally associated to a situation like falling in quicksand and leading to poverty without any way out of it. Let me tell you, the belief is absolutely flawed and there are ways to turn your debt into wealth. All you need is proper and careful planning.

Assessing the debt situation is important and the following simple steps can get you out of it as a winner. Once you start practicing, you will find that it is way more enjoyable to save than to spend.

Financial assessment

Once you are in a lot of debt, you will have to set your priorities straight. Begin by jotting down all the debts you owes, and that includes both your credit card bills as well as other loans you took. Then put in the bills that you have got to pay every month, as well as the rents that you might be paying.

Once you have a clear knowledge of your spending, it is time to equate the figures with your earnings. There is no way you can let your earning be less than what you are spending. If that is so, you need some serious reevaluation of your lifestyle and find out the major areas of expense that you can decrease or do away with.

Assess the spendthrift in you

Assess yourself and do not lie while doing so. Find out the type of spender you are. Do you indulge too much? Or do you spend only on the essentials? If you are spending on just the essentials and still going into debt, then you probably need to find a second source of income. If the debt was caused by mere indulgences, do away with that habit for your own good.

Use liquid cash

Credit card payment often makes us forget how much we can actually spend. Use liquid cash to avoid such situation. Do away with your credit cards, whose bills are already causing your debt situation, and focus on paying using the cash in hand. What you need to aim for is to pay off your debt and use the money you are paying for debt for creating a saving.

Save while paying off your debt

Every time you pay off a debt in the list after paying for all the bills and essentials, use the money you were paying to create a savings fund. Take the money and divide it into two parts. Keep one part as savings and use the other to pay off the next debt. Once you are through with paying off all the debt, keep all of the money that you were paying off as savings. Do this every month to create a savings plan.

Practically speaking, your savings will have to be at least six times of what you spend every month. It should be good enough to sustain you in case of an emergency. Follow these few simple steps and turn your debt into wealth.

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