How to Work Towards a Debt-Free Life
by Jeni Brian
Loans are one of the biggest challenges that prevent women from achieving financial independence. As of 2020, American women owe the majority of the outstanding student loans in the country. Women’s total student loans already amount to as much as $929 billion — and this is only a portion of the outstanding debt that women have accumulated.
While loans are important for career and personal advancement, individuals can accumulate huge amounts of debt due to financial constraints. Thus, to achieve a debt-free life, here are some financial strategies that you can implement:
Rethink your current budget
You can achieve your financial goals — and avoid costly mistakes — by being more disciplined with your money. Creating a realistic budget is an important step in paying off debts because it helps you manage your money responsibly. To start, gather data regarding your finances. This includes your income, regular expenses, monthly debt payments, and loan interest rates. Then, Paul Miller of accounting firm Miller & Company suggests using budgeting tools that can organize your financial flow and achieve your goals. You can use the envelope system to physically organize your money based on each spending category. On the other hand, spreadsheets and budgeting apps are useful if you want to track and categorize your spending to allocate for your needs and reach your financial goals.
Use a personal loan to consolidate debt
Budgeting is an important strategy for paying off debts, but it can be hard to pull off when you’re paying off multiple dues at once. You can make this process easier through debt consolidation. This may seem like a counterintuitive option for many borrowers. However, Marcus’ article on how to consolidate debt explains that this process boosts your repayment strategy by organizing everything into a monthly statement. As a bonus, you can also enjoy lower monthly payments and interest rates if you can prove your creditworthiness as a borrower. This allows individuals to pay off outstanding dues all at once, then focus on closing the debt consolidation loan with staggered monthly payments.
Renegotiate your loan terms with the bank
Another method you can opt for is to request your loan provider to lower interest rates or lengthen your term time. The Chamber of Commerce's article on renegotiating a bank loan states that banks and lenders may be open to adjusting your loan terms under certain circumstances. For instance, borrowers whose credit score has improved over the years have an advantage when negotiating for loans. Additionally, those with multiple accounts under the same bank are valuable customers and, thus, are more likely to be accommodated when renegotiating terms. Lastly, business owners faced with potential bankruptcy can openly discuss modifications in their loan, since client bankruptcy also puts banks at a disadvantage. Thus, it's important to discuss and renegotiate with your bank as alterations to your loan terms could make it easier for you to repay your debts.
Tap into financial education resources
Finally, you can improve your situation moving forward by investing in your financial education. 50/50 Leadership’s financial literacy survey reveals that there is a huge gap when it comes to women’s financial knowledge. This is alarming as financial literacy is essential in teaching women to support themselves independently. However, one’s background and upbringing may affect their level of financial literacy and, consequently, their financial well-being. So, to make better decisions regarding your money, reading articles, magazines, and journals on finances is a good place to start. You can also download financial management tools to learn the best practices when it comes to handling money. Finally, enroll in educational programs to improve your financial habits, increase your income, and manage your wealth.
American women need to repay thousands of dollars in loans for the sake of their career and personal life. However, it can be difficult to pay off these debts due to financial constraints and lack of financial education. To achieve a debt-free life, learn to budget, tap into any available resources, and invest in your financial knowledge. By leveraging all these avenues, you can forge a path to a debt-free life and financial freedom.