In a way, we are our sabotaging ourselves from getting rich by having bad debt.  Sometimes, having debt feels like we are in a bondage and we are left with little choices in pursuing our passion vs continuing with our mundane job.

So, I want to share with you some tips to help you eliminate debt, especially bad debt due to consumables, which at the end of the end of the day will give us more freedom to choose how we want to live our life:

1. List down all your debt – This seems to be so basic and fundamental but most people don’t know how much their total debt is. You need to do this to get the full picture and it can also be a harsh wake up call for you to change the way you handle your finances.

2. Consolidate your debt – Check if there are debts you can consolidate.

3. Call your Credit Card – To waive off your annual fee. To check if they can decrease the interest rates or if you can have a special arrangement to manage the credit card balance.

4. Earn Extra Income – Find another job or a sideline to have extra money to pay for your debt. For SG Employment Pass Holders, do note that this is not allowed in Singapore.  You can only work for the company indicated in your pass.

5. Cut your Unnecessary Expenses – Live simply. Live within your means.  Before buying anything think over it for a couple of nights and assess if you really need to buy the item.  Use this “extra money”, to pay of your debt.

6. Use of Snowball effect – According to Wikipedia, “a snowball effect is a process that starts from an initial state of small significance and builds upon itself, becoming larger (graver, more serious), and also perhaps potentially dangerous or disastrous (a vicious circle, a “spiral of decline”), though it might be beneficial instead (a virtuous circle). The common analogy is with the rolling of a small ball of snow down a snow-covered hillside. As it rolls the ball will pick up more snow, gaining more mass and surface area, and picking up even more snow and momentum as it rolls along. “

a.  Based on lowest amount of debt – After listing down all your debts, rank them in term in terms of the amount of debt, prioritizing the debt with the lowest amount. This method actually is found more effective as this encourages you that there is hope to overcome the debt-ridden situation.

b.  Based on highest interest of debt – Same method, list down all your debts but this time prioritize them based on the highest interest of the debt so that you can get out of the most “expensive” debt payment. Others call this the Debt Avalanche Method.  The only watch out for using this method that it may take time and patience to see significant impact on your debt.