Blog Post by Oval Money guest blogger Richard, Content Coordinator at Capstone
Happier living is a major focus in the world today. After generations who experienced two world wars, a post-war boom, social unrest, the rise and fall of the drug culture, and a growth of terrorism worldwide, large numbers of their kids and grandkids are deciding to rethink the directions of their lives and society as a whole. The course which many decide to take is one of a different work-life balance or a simpler life overall.
In the extreme, these trends have been shown in back-to-the-land and other movements. Most people are less radical, but almost all who undertake this transformation do so after deciding that they are simply tired of shouldering debt to sustain a lifestyle filled with things that they don’t need. They’re willing to live with less in exchange for a life focused on the things they enjoy, rather than being forced to do the things they hate to pay for things that don’t bring them happiness.
For many people, the road to happier living unfortunately begins by digging themselves out of debt. As consumer spending and household debt have burgeoned in recent decades, many have been left with massive home mortgages on unnecessarily massive homes, student loans, and credit card debt. To shift toward happier living, they must first right their finances and lower these debts. Below are a few steps to help in this process.
1. Build detailed records of your finances.
This includes listing all debts and monthly payments being made on those debts, as well as all income and expenses. Each of these needs to be tracked, broken down into detail and categorized. It’s almost impossible to do anything about your finances until you have an understanding of the complete picture.
2. Examine your goals and consider your priorities.
If you were shopping for a house, you would first sit down to think about what things are important for you to have. In this instance, you need to decide what, in your mind, constitutes happy living. In other words, why do you want to pay down your debts? Are you hoping to have more time to spend with kids? Freedom to travel? Maybe you’re hoping for a quieter life, or to try changing careers to pursue a personal passion. Catalogue these reasons – they will serve not only as your motivation but the framework through which you will examine individual debts and expenses.
3. Look for cuts that you can make in your finances.
The first place to look is for expenses that you can give up. If you want to have more quality time with your kids, then having family meals at home rather than dining out shouldn’t be a sacrifice. However, in light of your specific goals or mission, you should also take a look at your assets and decide what you might be willing or able to sell in order to pay down loans. Think about what kind of life you’re aiming to live. It may be worth selling your car, giving up nights out with friends, or even moving to a less expensive home in order to put yourself in happier circumstances.
4. Attack your debts in the proper order.
Once you’ve cut expenses or sold things you don’t need, pay down debts first that charge the highest interest, like credit cards. Once you’re done with those, you can move on to lower-interest items like student loans, lines of credit, or a home mortgage. However, it is worth noting that if you sell off any assets that are securing a loan, you will be required to pay off those loans first with any sales proceeds. Only what’s left afterward can be used to pay down other debts. If you decide to sell a car or maybe even a home, there many not be much or any money left over after paying down that particular loan, so think carefully and study your options, again, in light of what’s really important to you.
5. Seek other sources of cash to help pay down loans faster.
While you may already have two jobs, you can always look for ways to earn a little extra money, especially if they’re in line with a personal passion that you hope to pursue. As a boost to pay down debts faster you should also use any bonuses or cash gifts that you receive. As easy as it can be to spend that money on a trip or other luxury, use it to pay down debt and you’ll be that much closer to living happier on a more sustained basis.
Paying down debt isn’t easy, but it’s a worthwhile endeavor. This is especially true when it’s being pursued as part of a shift toward happier living. Follow these Capstone Financial Planning steps above, and you’ll be well on your way to doing just that.