What Is Zero Debt And How Does One Achieve It?

Zero debt can be defined as the process of achieving financial independence

. Financial refers to anything that concerns the managing of money. Financial independence means freedom from outside assistance. Therefore, financial freedom can be simply defined as the ability to manage your own finances without the assistance of a third party individual or organization.

Zero debt is normally determined by the debit to credit ratio. If the debit level is high and the credit level is at a zero, you can be sure that you are experiencing zero debt. This is because the term refers to people who have no debts and still have a level of debit. In banks, the money that you have in your account is normally referred as a debit.

Debt, on the other hand, is a term used to indicate the money owed to an individual or an organization. For example, when you get a loan from an individual or an organization, it will be classified as a debt. There are several ways to classify someone as debt free. In this article, we are going to show you a simple, step-by-step process that will help you reach a zero debt state.

The first step toward zero debt begins with evaluating your finances. Look closely at your sources of income and compare them to your expenses. Actual sources of income can be your salary, revenue from a business that you are running, or a pension. Things such as friendly loans cannot be considered as sources of income.

Once you have figured out your income, check your expenses. Create an expense account for everything that you spend money on during a normal month. This list should include food, clothing, fuel for a vehicle, and other similar expenses. The expenses that you have in a month will be the credit, while the amount you earn will be your debit. If your expenses are more than your earnings, you should evaluate further.

Take a good look at your expenses. You should be able to determine which of the things on that list are not necessary. Some of the expenses people have are purely for entertainment, and they can do without them - at least for a while. Try to cut down on the expenses as much as possible. For example, if you have two cars, try using the more fuel efficient one for the more urgent errands. Instead of using the car, you can take the train or take a bus to help you reduce your fuel costs. Sacrifices such as these will help you achieve a zero debt financial level.

Next, you should look at the loans that you have taken out. You should set aside a certain amount of money to repay such loans or debts on a regular basis. The money that you will have saved from reducing your expenses can be diverted to this cause. Once you have gotten rid of these debts, you will be on your way to financial freedom. You will also find that, with time, you will have a higher credit rating. This process is the simplest way to achieve zero debt in your finances.

by: Allen Jesson

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