Lifestyle

How to Stay Debt Free

No one wants to ever be in debt. It’s not only stressful but it forces you to spend money paying debts. Money that you could instead spend in other ways such as saving for your retirement or dream home. Sadly, the truth of the matter is, living debt-free can seem far from realistic. But it’s not unachievable.

Getting yourself out of debt can open a whole new world of opportunities for you, allowing you to reach your goals. Moreover, you will also be stress-free as you won’t be hung up on the debt cycle.

While it might seem impossible, some people have managed to live their lives without any debt. But it all comes down to choice. How bad do you want it? Are you willing to put in the work needed to enable you to become debt free?

If you are looking for tips on how to master the art of staying debt free, then this article is for you. Below are five practical ways that you can incorporate and stay on track toward a debt-free life.

Pay yourself first

No matter how bad your finances look, if you are committed to living a life that’s free from debt, then there are certain ‘tough’ measures that you will need to put in place. And one such way is by paying yourself first even when you believe you don’t have enough. In fact, paying yourself first is one financial piece of advice that you will never miss when it comes to saving.

Paying yourself first simply means putting money aside every month from your paycheck or business into an emergency savings account. Why is this important? Having ready funds available that you can use to pay for emergencies will help keep you away from credit cards or loan apps to cater to these emergencies. With an emergency savings account, you will be able to maintain a debt-free life in the event things don’t go as planned.

Pay off all your debt to be “debt-free”

Now, we are not saying that you need to pay all your bad debt at once. Paying off debt – accrued or current – is hard. It’s even worse if you have accumulated a huge amount of debt but your income has remained the same over time. Still, it’s doable.

For starters, make peace with the fact that paying off your debt won’t happen overnight. Secondly, assess all your debt and establish a plan on how you want to pay it over a given period. Start with the bad debt and then double down on other debts until they are all cleared.

Create a budget

There are plenty of reasons why you might not want to create a budget. But if you properly analyze the reasons you have, more often than not it all comes down to some of the myths that have existed for years around budgeting. But it’s nearly impossible to live a debt-free life when you can’t account for your funds. Creating a budget not only enables you to plan for the future, but it allows you to keep track of your spending and know where your money is going. This way, you can cut back on anything that isn’t necessary and channel that money to either paying off a debt or towards savings.

Understand the difference between needs and wants

One of the hardest things you will need to do when looking to establish a debt-free life to leave behind a meaningful financial legacy for your kids or family is to understand the difference between needs and wants. It is one of the most basic rules when it comes to controlling your spending, yet, the hardest to master.

A need is something you need to live each day. Clothing, food, and shelter are needs. Wants, however, are almost everything else. Of course, there is a grey area on this. For instance, just because you need a smartphone, it doesn’t mean that you need to purchase the latest release as soon as it’s launched. Similarly, a home upgrade could be necessary, but not an immediate need. Taking the time to differentiate between needs and wants will go a long way in helping you master debt-free living.

Stick to a plan once you are debt-free

Congratulations!!! You have finally managed to get yourself out of debt. And while that’s a step in the right direction, staying out of debt is the goal. Anyone who has had a debt that they struggled to pay for a while can bear witness that if proper measures aren’t taken, it’s easy to fall back into the same debt cycle.

So, how do you stay out of debt? You create a plan on how you intend to stay out of debt and stick to it. Of course, you will stumble and fall. Don’t stay down too long to return to your old ways.

Ismaeel

Statistician with interests in finance, risk management, loan products and market surveys. I also write on crypto currencies, Forex and a variety of financial instruments.

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