The amount of debt Americans have is frightening, to say the least. In fact, the average American has around $5,000 in credit card debt and $16,000 in auto loans. If you're anything like the average person, then it's time that you start considering ways to get out of debt as soon as possible. Even if you're not in debt right now, it's never a bad idea to start thinking about ways to become financially independent sooner rather than later.
Working towards financial independence doesn't necessarily mean you won't ever have any debts again. Paying off debt means that you are ready to take charge of your finances and establish yourself as an independent person who doesn't need anyone else to support them anymore. Implementing simple financial management habits today can help you build up your savings. Here are three strategies that can help you achieve financial independence sooner rather than later.
Start an emergency fund
It may seem drastic to start an emergency fund, but trust us when we say it's one of the best financial strategies you can follow to get out of debt. This strategy aims to create a savings account that can help you pay for unexpected expenses such as a car repair or a medical bill. Having an emergency fund is one of the best strategies you can use to get out of debt because you'll be able to rely on this fund when something unexpected comes up. If your car breaks down, for example, you'll be able to use the money you saved in your emergency fund to get it fixed. This way, you'll avoid having to use your credit card, and you'll also be able to lower your monthly payment.
Snowball Your Debt
The debt snowball method is a strategy that helps consumers with multiple accounts reduce their overall debt load by tackling small balances first. It's also called the debt-chunking method.
According to the 2012 Kellogg School of Management study, the debt-snowball method is "a good option for those looking to mitigate their debt burdens and make a dent in their overall debt." The researchers said it's best suited for those who don't have much time to invest in managing their finances due to demanding work schedules or family demands. The Northwestern study found that by following the debt snowball method, consumers can significantly reduce their overall debt loads and improve their financial well-being.
Invest in a 401(k) or other types of retirement account
There are different ways to invest money to get out of debt. One of the best strategies you can use to get out of debt is to open a 401(k) or other types of retirement account. Why is investing in a 401(k) or other retirement accounts one of the best strategies to get out of debt?
There are some reasons why this is the case. Investing the money you'll be saving for retirement is one of the best ways to get out of debt because you'll be helping to increase your retirement savings. Investing money in a 401(k) or another retirement account is also a great way to get out of debt because it's tax-advantaged. This tax advantage means you'll be able to significantly lower your taxes if you invest in something like a 401(k) or an IRA.
The truth is that many people find themselves in debt at some point in their lives, and it can be challenging to get out of it. That's why it's essential to implement some strategies as soon as possible. The sooner you start, the better.
Become Debt-Free With a Financial Coach
A financial coach is an excellent resource for setting your emergency fund and the debt payment process. In financial coaching, a money coach can help you plan to save more and prioritize debt payments. Furthermore, a financial coach acts as an accountability partner to help clients stay on track to meet their goals and improve their money management habits. The coach will help you identify your current money management habits and help you set attainable goals. Together, you will develop a plan to improve your financial situation. The coach can also be a critical resource for obtaining the necessary financial services to reach your goals.