4 Subtle Indicators You're on Track To Being Debt-Free
Debt can weigh heavily on your mental well-being, as falling behind on bills and interest can sap your energy and optimism. Fortunately, hope is not lost, and you must look to the bright spots that signal you're making progress toward becoming debt-free.
Recognizing and acknowledging these signs as the wins they are can give you encouragement and motivation to stay the course, even when the road ahead seems long and challenging. Here are four clear-cut signs you are making progress on your debts and should continue on the path to financial security.
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1. Your Income Exceeds Expenses
While cutting expenses is an important part of the debt repayment process, increasing your income can also provide a significant boost. Maybe you negotiated a raise at your day job or picked up some freelance work in addition to your primary source of income. Either way, it's a strong sign you're determined to accelerate your debt repayment.
"If you have more income than expenses, you are on the right track to paying off your debts," said Stoy Hall, CFP® at Black Mammoth. "When I see people understand it takes money to make money and that light bulb goes off, they start to not spend frivolously thus the 'bad debt' (overspending on cars, accessories, home, etc.) stops -- which allows your debt payoff plan to speed up."
You can make faster progress and potentially shave years off your timeline for repayment if you're able to earn just a little extra income.
2. You've Stuck To Your Budget
Living on a budget is a great habit for anyone, even more so if you're trying to make it out of debt alive. Your budget should account for all your fixed expenses, such as rent and utilities -- and especially your debt payments. It should also factor in variable expenses like groceries, eating out and entertainment.
"If you're building a budget and avoiding adding unnecessary debt, then you're showing discipline," said Jordan Mangaliman, founder of Goldline Financial Services. "This can further increase your financial stability in the future."
Budgeting like this forces you to understand where all your cash goes each month. That means you'll be able to identify where you can cut back. In turn, this frees up funds that can be redirected toward paying off your debts.
3. You've Kept Up on Debt Payments
If you always make your debt payments on time month after month, then you're definitely on the right track. It can be so easy to let other temptations and expenses get in the way. However, if you've got a solid pattern of putting your debt payments first, you're showing you're committed to getting out of debt.
"Being able to make consistent, timely payments proves you're on track," said Mangaliman. "This can show you're actually committed to reducing your debt load."
If you have a habit of missing or delaying your debt payments, that can have serious consequences, such as late fees and damage to your credit score. Not only that, but you're prolonging the time before you can finally get debt-free. By paying on time, every time, you're not avoiding these setbacks.
4. You're Increasing Your Savings
When your priority is getting out of debt, it's definitely challenging to save money at the same time. If you're able to gradually stash away a little here and there, though, it shows that you're in a good position financially and can make a world of difference down the line.
"If you're paying down debt enough that your savings are increasing, then your approach to financial management is working," said Mangaliman.
Your savings can also serve as an emergency fund, which is a crucial financial cushion to cover any unforeseen expenses without having to rely on credit cards or risk falling off of your schedule for debt repayment. If you've managed to set aside a few months' worth of living expenses, it's a real indication that you're taking a mature approach to your finances.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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