Are you stressed out about money? Are you wondering how you’ll pay your bills this month? Let me help you start tackling your financial struggles. First of all, start working towards a debt-free life. All purchases, excluding your mortgage, will be paid for with cash you’ve saved up. Live a life that is free from the burden of debt. You will have more freedom and choices as to how you’ll spend your money. You’ll be able to save more, invest more, and give more. In 29 months, my family has paid off over $62K in consumer debt, by adopting a debt-free lifestyle. We’ll pay off an additional $10K before the end of the summer by continuing to use these 6 best tips for becoming debt-free.
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6 Best Tips to Becoming Debt-Free
Tip 1: Stop racking up more debt.
By far, this is the most important tip which is often overlooked. Like with anything, you can’t continue to do the same thing and expect to have different results. The same goes for debt. Plain and simple, stop incurring more debt!
Have you ever drained a small kiddy pool? The first step is unplugging the drain stopper so all the water can drain out. Think of your debt as the water that needs to be drained. If you keep adding water to the pool (debt), you’ll never drain the pool of water.
Now, some of you will swear that you’ll pay off what you charge each month, and still follow the debt snowball payment plan. I’ll argue that if you were able to pay it off each month, you wouldn’t have a credit card balance in the first place. All of us start the month with every good intention to pay it off, but life happens. When an emergency happens, it’s easy to rationalize that you’ll pay it off later. Right now, it’s important to pay off the balance once and for all. Using your credit card and promising to pay it back is just too risky.
Tip 2: Learn to save.
Saving is another important money habit of becoming debt-free. Avoiding debt is only half of the solution. Your reliance on debt fades away when you have money saved up. Emergencies quickly become inconveniences.
Credit cards and car loans are used, simply because we’ve never learned how to pay with cash or save for these items. Saving takes discipline and time. Learn to say no to impulse purchases, so you have money to save in the first place. Once you’ve built up your savings, you’ll need even more financial constraint to only use it when needed. Seeing a large amount in your savings is not a green light to spend it impulsively. Use it only for an emergency or the item that the funds were originally saved for. When you use it, build it back up as fast as you can.
Tip 3: Live below your means, stop living paycheck to paycheck.
Living below your means is the next important tip to becoming debt-free. When you live the typical paycheck to paycheck cycle, it is difficult to save. In most cases, you’ll turn to debt again when a car or house repair hits you unexpectedly. In a study done in 2017, 49% of Americans are living paycheck to paycheck. Almost half of Americans are only one disaster away from a major financial setback.
Tip 4: Learn how to live on a zero-based budget.
A zero-based budget is the glue that will help you stick to tips #1 – 3. A budget is simply a spending plan that shows where your money is spent. Budgeting makes the most out of your hard-earned dollars. Learn to manage your money so you can pay off debt, save for emergencies, and invest in your future. To learn more about zero-based budgeting, click here.
Tip 5: Stop telling yourself “I deserve it.”
Stop playing the “I deserve it” game. We list reason after reason to justify our spending habits like “I work so hard” or “If I wait till I’m old, I can’t enjoy it.”
Justifying a purchase, by any means, will not help you afford it. Stop and ask yourself why you need to justify it in the first place. In most cases, you really don’t need it or can’t afford it. Stop sabotaging your financial future by rationalizing your impulse purchases today.
Tip 6: Be content with the things you have.
Mindless spending and buying items on a whim are one of the top reasons why most Americans have debt. Instead of valuing what we have, we long for the next new car or the next Instagram-worthy vacation. Stop buying things you can’t afford, just because you want it. Appreciate what you have and be content with what you can afford.
Summary of the Best Tips for Becoming Debt-Free
Living with debt does not need to be your story-line. With these 6 tips, you’ll get a handle on your finances. Learn how to live debt-free by incorporating these best tips: stop incurring more debt, learn to save, live below your means, live on a zero-based budget, stop telling yourself you deserve it, and learn contentment. These tips are the key success factors in my debt-free journey.
Leave a comment below on your best debt-free tips, or share which debt-free tip you struggle with the most.