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Be debt free in 10 easy steps

Jul 1, 2010 Homemakers Media

Homemakers, Jessica Padykula

Owing money can be overwhelming and paying it back can be challenging but you can loosen the grip of financial burden. Check out the best ways to be debt free and put them to the test now.

Getting into debt can be surprisingly easy. One too many purchases made on credit, coupled with job loss or financial surprises (i.e.: your roof caving in or car breaking down) can make for a drained bank account and a daunting amount of debt. Trying to get out of debt, however, can be a bigger challenge.

Be debt free faster with wise solutions from Cynthia Kett, a chartered accountant and certified financial planner with advice-only firm Stewart & Kett Financial Advisors Inc.

1. Spend less!
It may seem obvious, but even when in financial dire straits, people sometimes have a sense of entitlement about spending, says Kett. “Get in the mindset of living below your means, rather even that within your means,” she adds.

For example, go grocery shopping with a list, and don’t buy anything that’s not on your list (even if you think you really want it). Or set a weekly budget for groceries and stick to it. Make it a structured affair so you aren’t prone to impulse buys.

2. Do more at home
If you spend $5 a day for an on-the-go breakfast, you’re actually spending $100 per month on your morning meal. You’ll save more if you wake up 30 minutes early, giving yourself time to eat a bowl of cereal, or even taking breakfast from home to the office.

By saving $100 a month on breakfast at a 19.8% rate of return (that’s the standard interest rate on most credit cards), you can put $1,081 towards your debt in one year; all just by skipping that fast food breakfast sandwich!

3. Budget, budget, budget
Budgeting is an important way to be debt free; especially if you don’t want to incur more debt.

First, add up all of your monthly essential spending (rent or mortgage, phone bill, daycare, etc.) Compare that amount with your monthly income and look at what’s left for non-essential items (fast food, manicures, overpriced takeout coffee).

Ask yourself which items you really want to keep in your budget and prioritize your discretionary spending. Ideally, set aside a small amount for non-essential items and use any leftover cash to pay down your debt. “But be reasonable. You shouldn’t put yourself on such a strict financial diet that you don’t stick to it,” Kett says.

(Remainder of article no longer available online)