Stepping out of college may make people feel enormously excited to get up on their toes and start prancing their way to work life. Although we hear some people telling us to just go with the flow, some are unfortunately drowning in a tremendous amount of debt. In this article, I will share some financial tips on how to become debt-free.

While a particular debt may be due to reasonable circumstances, there is a need to learn on how to save money, from which the debt can be paid off.

One of the quickest ways to get educated on debt and financial management is through books. You can learn a thing or two from the best personal finance books to help you climb out of that financial sinkhole. Additionally, it’s always helpful to seek professional advice regarding financial matters. 

Why is it important to prioritize debt payment?
For some reason, many people who are in debt are not at all disturbed when they miss their payments. Unfortunately, when the financial meltdown catches up on them, they find themselves knee-deep in debt and unable to move.

Aside from having less worries, one of the biggest advantages of being debt-free is that you can use your money for a sudden need – say, one of your family members gets hospitalized.

So, instead of buying unnecessary things beyond your means, you should always be ready for immediate and emergency needs. 

Which debt should be prioritized first?

Most of the time, owning a credit card brings a strong urge for people to buy. Here’s the thing, though: credit cards were not created to make people suffer from debt. With proper use, credit cards can be extremely useful for anyone, such as when you don’t have loose cash in your wallet to pay for a quick purchase.

In order to know which debt needs to be settled fist, identify what kind you are dealing with.

There are two kinds of debt: good and bad. A good debt is something that you borrowed to pay for education or home construction. Meanwhile, a bad debt is something that does not improve your financial position. It can also be the debt that you miss paying in full within a month or two, such as dining in a lavish restaurant or buying the latest designer bag.

Determine what will give you the best boost. Always pay off the highest-rate bad debt first. That way, you can tick off your debts gradually one by one.

Consider the credit score effect. If you are planning to apply for a car loan, you might want to pay your credit cards that are approaching the credit limit. This way, you can be offered a much lower interest rate, as financial institutions will see you as a responsible payer.

Should You Blame the Credit Card?
The mean credit card debt of U.S. households is approximately $5,700, according to recent data from the Survey of Consumer Finances by the U.S. Federal Reserve. Some people may not be aware of how they can stay out of debt when using their credit cards.

If you purchase an item, you should be able to pay for the amount in full the following month. Not being able to pay in full will incur finance charges at a high-interest rate, and the amount to be paid may soar high if left unpaid for several months.

How To Manage Your Debt and Be Debt-Free
Everyone who has a debt needs to learn how to manage financial obligations properly. Some people may start with small debts that can be manageable for some time. However, if taken for granted, the amount may balloon to something that could make anyone’s life miserable.

You need to make sure that your urge to buy doesn’t get out of hand. Here are some sound financial tips to make sure that you’ll end up debt-free and away from further debt:

Know the people/institution and how much you owe

Make it a habit to jot down important things such as the names of the people that you owe money, the amount, the interest rate, the number of months that the money needs to be paid, and the due date. Update your list every so often.

Always pay your dues on time
Any unpaid amount means that the interest rate and finance charges will increase. Over time, if the amount is left unpaid, it can be quite a pain. Set a reminder on your smartphone so that you can settly your bills and financial commitments before the due date.

Pay at least the minimum payment
If your current financial status does not allow you to pay the amount in full, at least pay the minimum required payment. The minimum payment doesn’t help you make real progress in paying off your debt. However, it keeps your debt from growing and keeps your account in good standing.

Decide which debts to pay off first
I’ve written several articles about debt management at Finance Blog Zone, and one of the best pieces of advice in this matter is to know which ones to prioritize. Make sure to pay the credit card with the highest interest rate and the one with the lowest balance first. 

Start creating an emergency fund
Not having access to a saving account may leave you with no other option but to loan. Therefore, start off saving a few dollars a month, and increase it little by little until you are able to build a reserve of 6 months of living expenses.

Use a monthly budget plan for all of your expenses
It would not hurt to set aside a certain amount of money for things that you will spend on. That way, you know that all your obligations are taken care of. At the same time, you are able to set aside a certain amount for savings.

Save yourself from future financial mishaps by knowing how to manage your finances carefully. This way, you can free yourself from the burden of taking out a loan or swiping your credit card. At the same time, it can give you a more comfortable and secure feeling of being debt-free.