Debt Free Living May Be Easier Than You Think
In today’s economy, debt free living may seem like an impossible dream. The ease of “buy now, pay later” techniques have brought many U.S. individuals and families into debt through credit cards, second mortgages, and installment loans.
But the truth is that despite the widespread availability of credit today, by making just a few simple changes in your spending and saving habits, you could be living with no debt in the near future.
The Step-by-Step Debt Free Living Plan
Once you choose to live debt free, there are a few steps that should be taken in order to move you towards your goal – and the first of these is to stop adding to your debt. Certainly, the best way to keep debt from piling even higher is to “stop the bleeding.”
In doing so, you have some viable options, such as:
- Only Pay Cash – When shopping for groceries or other household necessities, use only cash (or debit). By paying for items immediately, you will not only reduce your additional debt load, but you will also not be subject to paying more for items due to the high interest rates that are charged on credit cards. This is especially the case if you carry a balance on your cards from month to month.
- Reduce Your Costs At the Check Out Line – Certainly, everybody loves a discount – and you can easily obtain discounts on most of the items that you purchase by using coupons, looking for sales, and even reducing the items that you purchase altogether.Although many people do not like to spend the time and effort to clip coupons, the savings can really add up. Even if you save an average of $20 per week on items that you regularly purchase, you will have eliminated more than $1,000 in annual savings – an amount that could go towards paying down your other debt balances.In addition, before going to the store, take a good hard look at how you could reduce your purchases altogether. For example, do you really need to purchase that $5 case of bottled water each week, or could you opt to drink water from the tap instead?
Chipping Away At Current Debt
Once you begin paying cash for items going forward, you will also need to create a plan for eliminating the debt balances that you currently carry. This, too, involves taking several steps in order to achieve your goal. At minimum, these steps should include:
- Calculate Your Total Debt – While many people don’t want to see their total amount of debt on paper, the best thing you can do is admit that you are in debt and see where you’ll be starting from.
- Decide Which Debt to Pay Off First – Although you will likely be required to pay at least some amount on all of your monthly debts, it is a good idea to decide which of your debt balances you will completely pay off first. One way of tackling this is to pay off the smallest balance first. This will quickly give you a sense of accomplishment, and it will eliminate an entire payment once it has been paid off. Having fewer debts to pay each month will also help to motivate you to keep moving forward.
- Roll Over Your Savings – Once you have paid off the first debt, use the money that was going towards that particular payment and add it to the next debt on your list. For example, if you were paying $300 per month to pay off credit card #1, apply that $300 plus an additional amount to pay off credit card #2.
- Cut Up the Credit Cards – As you pay off each debt, cut up the cards! Or at least hide them where they won’t be used again to run up debt. By sticking to your method of only paying cash for items, you will be much less likely to accumulate high debt balances again in the future.
Debt Free Living Today Helps You to Save for the Future
As you pay off your debts – and begin to have less outgo on a monthly basis – you may also want to factor in a savings plan. With the money that you save by paying off your debt, you will have additional cash to place into an emergency fund, as well as for future investments or for starting a business.
Having an emergency fund will also help you in reducing future debt, as these funds can be used in lieu of paying credit when the car needs maintenance or the furnace requires an unexpected repair.
Overall, debt free living will require that you alter your way of thinking about your finances. For example, rather than purchasing expensive or unneeded items now, think of the money that you save as “buying” income for your financial future.