At Project Debt Relief we have spent a lot of time (especially on our debt relief blog) talking about how to get out of debt. We have provided countless tips, suggestions, and pieces of advice for those struggling with overwhelming debt of all types. Our magnum opus if you will is our post on 25 ways to get out of debt. It covers a plethora of different methods of debt reduction and relief and provides at least one resource for each.
But one thing that we have not covered nearly enough in the past is how to stay out of debt in the first place. I mean, if you don’t have any debt to begin with, then you won’t ever have to worry about unpaid monthly bills and all of the trouble that they cause. In fact, avoiding debt is the single best way to get out of and stay out of debt.
Set a Goal
Set a goal to stay out of debt. This is the first thing that every single consumer should do. Though it can be a somewhat difficult goal to stick to, its benefits far outweigh that particular struggle.
The biggest problem with setting this goal that most people have is that it is no fun. The media and popular culture have only strengthened this idea. Everywhere you look, you see people borrowing money, taking out loans, and using their credit cards. In advertisements these people almost always look happy with what they are doing.
Furthermore, we have been taught that having a credit card is a sign of financial responsibility. This isn’t exactly true. While taking control of your money and finances is certainly a very mature thing to do, overspending and falling into debt is not.
Along with setting a goal not to ever stray into debt in the first place, it is important to push your preconceived notions aside. It is important that you stick to your guns.
Form New Habits
Forming new habits is another essential part of staying out of debt. Unfortunately, this can be one of the hardest steps of the process.
Your individual spending and savings policies dictate how well you will be able to stay out of debt. By having strong ones, where you save money each month and don’t overspend, you will be setting yourself up for a debt-free life.
Start slowly if you need to and build from there. Create new habits around not spending what you don’t have and saving any extra money at the end of each month instead of making extra purchases. Before you know it, your new savings and spending habits will be nothing more than second nature.
Don’t Always Fight the Urge
Many people that are new to responsible spending and saving get the idea that they can’t ever spend money on themselves. This is especially true of people who have struggled with debt before and want to stay out of it from now on.
A common debt relief motto is “fight the urge to spend.” This also easily applies to credit card usage. However, it is slightly radical, and doesn’t always need to be followed to a T.
While you should definitely fight the urge to make unnecessary purchases (especially credit card purchases that you don’t have money in the bank to fully cover), you should still treat yourself on an occasional basis. As part of your new habits, it is wise to buy yourself a few nice things every now and then, as you can afford them. If you don’t do this, and just cut yourself off cold turkey from anything pleasurable, you’ll probably end up breaking down in a big way.
It certainly is possible to stay out of debt while still having an enjoyable life.
Be Careful With Credit Cards
While credit cards are no doubt helpful in many different ways, they can switch faces almost instantaneously. Credit cards can go from helpful to bad to worse in the blink of an eye. It all depends on how you use them.
If you have had trouble with debt in the past, then you might want to just consider getting rid of your credit cards altogether. This is an especially wise consideration if your previous debt problem was caused by credit cards in the first place. People that have credit card spending problems once more likely than not will have them again.
Even if you have not been a particularly poor credit card user in the past, it might be wise to limit the number of ones that you have. Pick the best credit card for you and then keep it only for emergency situations. In fact, that’s what I recommend for everyone: a single credit card. Consider trying out a debit card (or bank card) if you have an attachment to plastic.
Another way that you can be careful with credit cards is by using them in the correct manner. You should never use your card to make large purchases that you can’t cover with cash. Many people trick themselves into thinking that they can use their card now, earn the money later, and pay it back.
Well, as you probably know, this doesn’t always end up happening. Oftentimes, they use their card, can’t save up enough money to quickly pay the bill off, and end up paying much more – sometimes hundreds of dollars more – than the original cost of the item due to high interest rates and late fees.
A good suggestion is to use your credit card solely for regular purchases. If you use it for things like your regular weekly grocery run (which you would normally use cash for), you can reap all of the rewards. You will be able to pay the bill of in a timely manner while at the same time earning rewards and points on your credit card and building your overall credit. It’s a win-win situation.
Budget Your Money
To stay out of debt it is absolutely essential that you budget your money and monitor your spending. This is also one of the best things that you can do to get out of debt that you have already accrued.
Most people find that keeping a log of purchases makes monitoring their spending easy. Collecting receipts and filing bank statements can also be of use.
At the same time that you are doing this, you should probably also be following a budget plan. A budget plan should include estimates for all of your regular monthly expenses including rent, utilities, food, gas, and so on. Leave a little extra money at the end of each month (if possible) to put into savings.
Another useful budgeting tip is to track your spendings for two months. After the two month period, you can analyze your spending habits. This is very helpful for creating an expense sheet, if you don’t already know how much you are spending in different categories such as entertainment, food, and gas.
Collecting the information in the above manner also makes it easy to get a clear picture of your spending habits. This can also be useful for setting up a budget plan that you can really stick to. There is no point in making a budget plan that you are going to break. Make one that is strict and effective yet reasonable.
There are plenty of other excellent ways to make your budget plan even more effective. Check out these six little known budgeting tips for more information.
Unfortunately, the importance of saving money is a topic that is not discussed often enough in modern day America. We are a spending nation where spending and not saving money is the norm.
If you are worried about falling into debt or just want to take preventative measures, then building up your savings is key.
Putting a little money aside each month into a savings account is a great way to give yourself some cushion. Such a savings account should only be dipped into in the case of an emergency. Don’t put money into it that you are going to take out of it a week or two later.
While you’re saving money in a savings account, you might also consider opening a separate retirement savings account. Even putting just a few dollars into an account like this every month will pay huge dividends when you are of retiring age. More and more people nowadays are entering retirement in debt (or soon to be in debt). Having at least a little money saved up for this important point in your life will lessen the financial blow by more than you can count.
Finally, it is important to save up for purchases rather than sign up for monthly financing plans. A good example of this is when you buy a new television set.
Most stores these days offer financing plans for their customers. These often include low monthly payments and sometimes low monthly interest rates. This entices many people who could not otherwise afford a television to buy one. Often they end up falling into debt over a purchase that now seems frivolous.
In this particular scenario, it is usually best to just save money on the side until you have enough to buy the television in cash. This will make absolutely sure that you don’t fall into debt.
Earn More Money
Though this tip is extremely effective, it is the hardest one of them all. While earning more money sounds nice, it takes a lot of work to accomplish.
However, many people just can’t lower their monthly budgets enough to pay for all of their purchases and continue saving money. This is especially true of people that are already paying off debts or that have credit card payments to make on a regular basis. For these people, earning more money is one way to take some of the burden off of their shoulders.
The first logical step to earning more money is asking for more hours at work. By putting in more time at the office, you are able to show your boss that you care about your job and make more money at the same time. Who knows, you might even get a raise.
If working more hours at your current job isn’t possible, you might consider taking on an extra part time job. I’ve heard of a lot of people that do this temporarily when their financial situation has spiraled out of control. It can be an effective way to get everything back under wraps and get on with your life.
Another option is to just pick up some extra work around town. Finding odd jobs is a good way to do this. Odd Job Nation, a popular website, lists odd job help wanted advertisements in much the same way as Craigslist.
Advertising yourself locally around town for such jobs as dog walking, lawn care, and babysitting is another prime route to take.
Do Things Yourself
There are a lot of incidental expenses that come up each month. Many of these involve repairs or refurbishments of some sort. We often hire professionals to take care of these things and end up forking over a lot of money.
An example of what I mean by this is an oil change. Instead of taking your car to the automobile shop to have the oil changed by a mechanic, learn to do it yourself. Changing your oil yourself really isn’t all that hard of a thing to learn to do. Plus, it can save you a ton of money in the long-term.
If you have gotten this far, then you have the tools and the knowledge that you need to stay out of debt. Remember that the easiest way to get out of debt is to not have any in the first place. It is also important to remember that you yourself are the most important tool that you have to staying out of debt. Trust yourself, stick to your guns, and use your common sense when doing anything related to your hard-earned money.