3 Smart Ways To Attain Debt Freedom Even With Credit Cards

3 Smart Ways To Attain Debt Freedom Even With Credit Cards

 

It is pretty certain that you have heard the advice that if you don’t want debt, you have to avoid credit cards at all costs. However, such a notion is a misconception. When you can manage your credit card pretty well, you will experience a debt-free life.

 

There are numerous “financial experts” that insist that credit cards are evil. Of course, that should be the case if you will not manage the use of these tools properly. But for those who are financially literate, these credit cards will never be a source of a problem. 

 

Here are some strategies that you can employ to ensure that you will not suffer gruesome debts, even with the presence of credit cards. 

Create An Emergency Fund

If you want to sustain your financial freedom, you need to improve your emergency fund first. While it sounds far-fetched, the truth is, these emergency funds are essential so that you can elude incurring debts. Of course, that’s crucial to avoid financial stress, as well. 

 

Once you have an emergency fund, you will be able to compensate for sudden disasters, such as hospitalization and repair of your damaged cars. You can respond to these circumstances without taking any loans or resorting to your credit cards. 

 

If you don’t have an emergency fund, you should start now. It is recommended that you open a separate account for this matter so that you will not get tempted to spend the money you saved. It is great if you can open an account with a bank that provides high-yield interest. 

 

It is really up to you how much you are going to save for your emergency fund. However, it would really be ideal if you save big. The bigger your savings, the bigger the safety net that you have. 

Create A Plan For Debt Payoff

Of course, one of the most reliable methods to avoid debt is to get rid of the existing ones. If you let some of your debts stay, they are likely to increase and accumulate. Furthermore, the thought of having debt is mentally burdening. 

 

Contrary to popular belief, paying debts require extensive planning. Overall, the plan should include your financial goals, why you want to be free from debts, and the reality of your financial standing. Moreover, you have to list down all your debts and their debts. 

 

The following payment strategies should be considered whenever paying debts. 

 

  • Debt avalanche – In this method, you are going to pay the minimum amount to your debts. After that, use your extra cash to pay the debt with the biggest interest rate. Once you have settled that debt, you can gain financial momentum, which you should utilize to deal with your other high-interest debts. By doing this method repetitively, you will be able to save money from paying interests. 

 

  • Debt snowball – Like the first method, you need to pay the minimum amount for all of your debts. After that, you can use any money left to pay the debt with the smallest balance. After paying it, you will have extra money already to pay your other debts. After all, one cleared debt means extra monetary leverage on your part. Paying one debt to another will gain you victory over your financial liabilities. 

 

  • Debt consolidation – If you have a lot of debts in your book right now, you might want to pay them with the use of a balance transfer or personal loan. Doing this will help you lower the interest rates that you are dealing with monthly. But at the same time, it might also result in more long-term payments. 

 

Are you wondering if you should include your student loan in any of these payment methods? Well, that’s up to your personal preferences. If you think that you are going to feel relieved if you can pay your student loans, then do so. However, if your goal is to save as much money as you can, it is better to invest your money in retirement plans instead. You should do this if your student loan has a minimal interest only. 

 

You can also refinance your student loans if you have a huge income and high credit scores. 

Utilize Your Credit Cards Wisely

Let us be honest with you: there’s no real need to have credit cards if you want to have a life free from any debts. But at the same time, there’s also no need to avoid acquiring credit cards so that you’ll not drown in debts and liabilities. 

 

If you can utilize your credit cars properly, they will not become burdens that you need to carry. In fact, they can become an asset. For one, these credit cards can give great rewards for those who pay their dues regularly. Furthermore, a properly managed credit card can enhance your credit score. It will allow you to avail of more loans and financial grants. 

 

If you want to use your credit cards without incurring debts, you should try the following methods:

 

  • Pay your balance fully – One of the golden rules in using credit cards is paying your statement balance altogether. If you have monthly dues, you should pay them religiously. Never skip a payment deadline. Fortunately, most of these credit card providers have grace periods that you can take advantage of. You should pay your dues on time so that you will not get any interest. 

 

  • Do not spend unrealistically – Of course, there’s no denying that sign-up bonuses are extremely tempting. However, you should only go for one if you can pay it without going overboard to your budget. Otherwise, such a decision will harm you financially. For instance, if you are putting $1,000 allocation to your credit cards monthly, you should not get promos that will require you to pay $3,000 in three months. Anything more will elevate your debts. 

 

Ian Schindler