What is the main obstacle in your way to achieving financial freedom?

Debt is something that a lot of people rake up very quickly. Having debt is a major obstacle to achieving financial freedom because of the interest you pay. Interest is added to your debt and this must be paid before you can pay off any of your loan. The payments eat away at your income which means you have no or little money left to save.

The less you earn, the more likely you are to be in debt, and the harder it will be to get out of it. Sometimes you may have no choice but to get a loan to fund necessities (eg car/education). Sometimes you may have used your credit card to buy things you've wanted but don't really need. This is all in the past now and instead of looking back and regretting purchases, you should focus on how to get out of debt.

How should you start?

First of all you should make a list of all your debts. Write down the type of debt, the amount you owe, the interest rate, the amount of fees you pay, and how often you need to make payments. Include all debts (this means your student loan and mortgage). This is what it could look like:

Type	Amount Owed	Interest Rate (p.a.)	Fees	Frequency of Repayments
Overdraft	$1000	0%	$2 per month	-
Credit Card #1	$1600	19.95%	$35 per year	Monthly
Credit Card #2	$1300	6%	$24 per year	Monthly
Personal Loan	$1800	5.75%	-	Fortnightly
Student Loan	$29,000	0%	-	Fortnightly

This is a good exercise to do because it highlights how much you owe altogether. This can be shocking enough to make you want to change your ways. It also shows that repayments, fees, and interest rates can vary a lot depending on the type of loan. It also means the amounts you'll need to pay will vary too.

In my next post I will continue by giving some ideas on how to eliminate all the debts you've listed.