debt consolidation

Financial Freedom with Debt Consolidation

This article shows you the key tools for making a financially stable life a reality with the right debt consolidation strategy. Clarify your financial goals as well as other relevant life goals you might have.

Here’s the step by step guide to achieving financial freedom using the right debt consolidation loan:

Write down your life goals.

You can create a worksheet and divide them into three columns. On the first column, write down your goals. List your priorities on the second column. You can ask your partner or spouse to help you fill out the columns and decide on the order of priority of these goals.

Don’t let your lack of money decide your goals. Just put everything you really want to accomplish without considering your financial status at the moment.  Who cares if you don’t have money right now? Those are your wishes, the things that motivate you to keep moving forward and the reasons why working hard makes sense. So, write them freely without guilt.

Now, organize your goals in terms of time frame. Which of these goals would you like to accomplish in a month, a year, or two, five years, ten years and so on? Separate them into rows. The purpose of separating them is to make sure that you will have the right budget for each goal which could also serve as a guide in saving money for them. It’s because, as you’ll realize later, your savings will be greatly influenced by your motivation to reach each goal.

Next, organize your goals in terms of priority. Here’s an important tip: make early retirement a priority. Regardless of your age, it is important to look forward to your golden years—the time when you’re supposed to enjoy the fruits of your labor. Decide which of those goals you can save money for, and which goals you may be able to borrow for. For example, while you can borrow to finance your child’s education, you cannot borrow for your retirement. What you can do is to borrow money right now so you can invest it on your retirement fund.

Write down on the third column what you need to do to accomplish each of your goals based on when you want to accomplish it and how much it will cost. It will help you realize that the money you will set aside and the stake of obtaining money or borrowing matter a lot as you reach your goals.

Before you proceed to the next step take another good look at the order of priority.

Are you willing to work and save money for each goal? If so, do you have what it takes to save and practice diligence in managing your money to achieve a particular goal? Would you consolidate all your consumer debts, take advantage of your home equity and practice frugality while working extra hours? If you answer “Yes” to the above questions, you can proceed to the second and final step.

Create a positive net worth.

Look at your current financial resources. Where are you right now in terms of financial stability? Remember that your financial resources have a huge impact on your ability to convert your goals into a reality and to protect your goals from difficult financial situations.

Here are tips to get it done:

Compute your net worth. Calculate the value of your assets minus your liabilities. Get a copy of your credit report to make sure that you got all your debts covered. Your current net worth is a snapshot of your financial status right now.

Here are the things to include in your assets:

  • certificates of deposit
  • checking and savings accounts
  • current value of investments:
  • home (if owned)
  • IRAs
  • real estate
  • retirement accounts
  • stocks
  • other retirement benefits

Below are some examples of the things you can add to your liabilities:

  • auto loans
  • credit card debt
  • income taxes due
  • outstanding bills
  • remaining balance of the mortgage on your home
  • student loans

Subtract all the money you owe from your assets. If you have more liabilities than assets it is time to consolidate these loans and find ways to have a strong net worth.

For example, if your total debt is $100,000 more than your assets, then you should work not only in paying off your debts through debt by consolidating it, but by working extra hours, starting a business or getting an extra job or two.

If your aim is to create a positive net worth then you need to learn not only to budget your current net worth, so you can cover not only your liabilities and your daily necessities but to grow your money as well.

Want to find out more about the right debt consolidation strategy to achieve financial stability and freedom from debt? Enquire now.

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