3 Simple Hacks To Become Debt-Free(Part 1 of 3)
Becoming debt-free is easier than you think
US household debt is at an all-time high — the Federal Reserve Bank of New York.
According to the same report, Washington DC has the highest credit card debt per person.
Not just in America, the debt situation of individuals is worrying in pretty much every country.
No country or government can give its citizens loan forgiveness infinitely. At some point, the Govt would say Enough is Enough and now you are on your own in the whole debt situation.
The reason? The Governments are in huge debt.
Let us face this one fact.
An average individual needs to take debt to buy a house, or car or finance higher studies. All these are matters of great pride. But how to get rid of the mounting debt behind that purchase?
Sure, you can pay off part of it when you get a bonus or when some extra cash comes in. But, all these are not certain. What if you had to use the bonus for something else? What if extra cash is getting spent on something important?
Let me share the first hack to pay down your debt sooner without relying on extra cash coming in.
Hack #1: Pay an additional EMI every year. You can repay the loan sooner and save on the interest cost.
Here is how.
Imagine you have a home loan of $300,000 at a 7.2% fixed interest rate for 20 years. Your monthly EMI would come to $2362. Imagine you took the loan in June 2018 and EMI kicks in from July 2018. Your loan will be fully repaid in 20 years, i.e by June 2038
Now, imagine you are going to pay an extra EMI at the beginning of every year.
- Every year, in July you pay $4724 instead of $2362. The loan will be now repaid by May 2035, less than 17 years.
- Additionally, you will save $49,549 in interest.
Now let us face the elephant in the room.
How are you going to come up with an additional EMI every year? It is almost half of the average salary of an American.
Let us break the $2362 into 12 parts. It comes down to $197 every month, which is an amount you can try to save.
How to find where you can save? Carefully track your income and expenses. I am sure you will find plenty of places where you can save tens of dollars.
Don’t believe me?
I was surprised by the money I was paying for online food deliveries and impulse purchases during online sales.
If you need an easy way to track the daily expenses,
I have built a simple, easy-to-follow and affordable Income and Expense tracker. This will help you efficiently manage your income and expenses and figure out unnecessary spending.
Grab the tracker from the link below and start your debt-free journey today.
I will be sharing the remaining 2 hacks in the coming stories. Follow and subscribe so that you don’t miss them.
If you wish to get more stories on personal finance, follow this account.
You can also check out my other articles around personal finance 👇
