I know the title of this post is harsh and many of you are likely to disagree with the use of the word “slavery” but I feel there really is no other word that best describes the situation someone is in when they are severely in debt.

Someone who is massively in debt is, for lack of a better term, owned by the company to which they owe money.

Let me explain:

A debtor no longer work for themselves so that they can stash away money for a rainy day or splurge on something nice for the family. Nope. When you’re in debt, you are working to earn money simply so you can pay off the credit card, the car loan, the mortgage, and whatever other debt you may have accumulated.

You are no longer working for your best interests, instead, you are working to pay off all of your interest. You no longer live life on your terms, rather, you’re living your life by the terms of your loans.

And if you don’t pay back your debt fast enough, making just the minimum monthly payments, you end up in tighter and tighter shackles.

Now, I know you can do things like declare bankruptcy, but that’s almost always a last resort, and is a painful process that takes plenty of time and still leaves you owing some money. It’s not as if your slate is wiped clean.

I also know that in many cases this slavery is self imposed, due to poor financial decisions and an unwillingness to tackle the problem before it spiraled out of control.

But, thankfully, there is a way to free yourself from your debt slavery, and that way is you.

By coming up with a simple, yet comprehensive plan to tackle your problem once and for all, you can not only pay off your debt, but set the ground work for a very successful financial future.

What A Debt Freeing Plan Would Look Like

Obviously, each person’s situation is going to be unique to them, however, below are three steps that are likely to be a starting point in any debt reduction plan:

1) Know the difference between needs and wants. Having this understanding is absolutely fundamental if you are to live below your means and overcome your debt. The example I always use is food: you need something nutritional that fills you up, but you want to out and eat a steak at a nice restaurant.

A need fulfills something that either helps to or does sustain you. A want simply fulfills a desire.

Once you understand this, as part of your debt solving plan you need to look at every single purchase you make under this microscope.

2) Go on a spending fast by cutting out the want spending and reducing the needs spending. Now that you understand the difference between needs and wants and you’ve become serious about tackling your debt, you should cut out all want spending until your debts have been paid off, or, at the very least, at a much more manageable level.

From there, look at where your money is going for your needs. Can you find ways to reduce your weekly grocery bill? What about your utilities? Anyway, I think you get the point.

Now you’ll really be on the path to slashing your expenses and spending less money.

3) Put the money you’re now saving toward paying down your debt. Now that you can make more than the minimum payments or can now contribute more towards your bill each month you need to do it! The more you contribute towards your payment, the faster you’ll be out of debt and able to live your own life.

Let’s look at this example: you have $10,000 in credit card bills, an annual interest rate of 18%, and you make just the minimum monthly payments

If you were to pay just the minimum monthly payments, it would take you nearly 28 and a half years to pay off the loan, and that assumes you don’t add any more debt to your balance. Plus, at the end of the 28 and a half years, you will have paid $14,500 in interest, meaning you eventually pay $24,500 to borrow $10,000.

That’s not a good deal.

Now, let’s look at the better example: you have the same problem as above, but because you’re saving money, you’re going to pay $500 per month towards your bill (about double what you would be paying at the beginning of the minimum monthly payment scenario)

By paying well above the minimum monthly payment, you are able to pay off your $10,000 debt in just two years, and pay only $1,500 in interest charges.

Two years vs. 28 years. $1,500 in interest vs. $14,500 in interest.

You tell me which is better?

So, on that note, if you’re in debt, work like hell to get out of it. If you’re not in debt, work like hell to stay out of it! Don’t end up being owned by your debt!

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