Contrary to Popular Belief, It is Possible to Live Debt Free
You have been conditioned. Banks, credit card companies, and even your friends, have been conditioning you to think that you need debt.
No money down! 0% APR for 6 months! No closing costs!
You probably see it a dozen times a day, in a dozen different ways. It is so ingrained in our consciousness that it almost seems weird to see someone make a large purchase with cash.
But it doesn’t have to be that way!
You can take steps today to be debt free for life.
Living Debt Free Takes Discipline
Becoming debt free for life does take discipline. Anyone who tells you otherwise is lying to you (or, more than likely, trying to sell you something!). Just like dieting and exercise, you must have a goal and a system in place. If you’re already in debt, you are going to have to change the way you think about credit and how you spend your money. You will also have to learn how to control impulse spending.
Budgeting – The First Step to Living Debt Free
Budgeting is not fun or glamorous, but it is a critical skill if you want to live debt free for life. You have to be in control. You need to know what is coming in and what is going out. If you don’t have a plan and a budget, and when you’re in debt, you are no longer in control of your money: your creditors are.
Your budget should be whatever works for you. It might be as simple as a monthly spreadsheet of income and bills to start. For those who prefer online systems, Dave Ramsey’s Every Dollar and LearnVest are great places for beginners. There are dozens of great apps out there too such as Mint, Personal Capital and Good Budget. If you go for an online program, look for one that links to your bank account and credit cards so you don’t have to enter your expenses (the easier it is for you to stick to a budget, the more likely you are to do it).
The important thing is not how you do it, but that you maintain your budget consistently.
Cut Your Expenses to Free Up Money for Savings
This is where most people fail at living debt free. They just don’t want to give up that expensive cable package or the new car every two years. But if you want to live debt free for life then you have to either earn more or spend less. If you’re not sure where you can cut back, try getting someone you trust to look things over and give you some advice. You might just be surprised at how much you spend eating out, renting movies, and buying new clothes.
Sh*t Will Happen
Before you can truly live debt free for life, you will have to have an emergency fund. If you skip this step, you will probably find yourself right back where you started the first time the car needs a major repair.
Your starting goal should be $1000 in savings set aside for true emergencies (an unexpected trip to the hospital or a death in the family is an emergency-a sale at Nordstrom’s is not). You need to get that $1k in the bank as quickly as possible. Trust me, you will feel better once you have a cushion.
Once you have $1k in the bank, aim for two. Slowly but surely you want to keep adding until you get to the point that you have the equivalent of 6 months worth of expenses in the bank.
Consider this a preventative strike.
Make a Plan to Pay Off Your Outstanding Debts
Many of you have probably heard of the “debt snowball.” There is a good reason for that! It is popular, because it works!
What it involves is listing all your debts from the smallest balance to the largest. Each month, you make the minimum payment on all but the smallest debt that you have. That may be an old doctor bill, a credit card or whatever. For that debt that has the smallest balance, pay as much as you can possibly can. Once that bill is paid off, move on to the next smallest, using the same strategy, and keep going until it is all gone.
Keep yourself motivated by celebrating each debt that is paid off. It doesn’t have to be anything expensive or big, but you need to stay motivated and have something to look forward too.
Paid off the car? Take your sweetie for a drive in the country and have a picnic. Finally paid off that MasterCard bill from college? Invite some friends over, have a bonfire and burn that sucker! Whatever makes you happy and will keep your spirits up.
Plan, Plan, Plan
If you drive a 1992 Ford Taurus, chances are you are going to need a new car soon. Plan for it and wait for it! Drive that ford for as long as you can, putting the money you would have spent on a car payment in the bank. If you can save $300 a month for 2 years you will have over $7000 in the bank, not counting interest!
You can get a pretty nice pre-owned car for $7k.
Learn to make do with what you have, for as long as you can, Put the money you aren’t spending on credit cards, car payments etc. in the bank and save it, just as if you were making the payments-PAY YOURSELF FIRST! This is probably the most important thing you can do to avoid going back into debt.
Share Your Plan!
What do you think? Does this sound like something that would work for you and your family? Do you want to be debt free for life? The don’t be afraid to share it! POst it on Facebook, tell your neighbors and send a Tweet! The more people you tell, the more accountable you will feel.
I too would love to hear how you are progressing. Leave me a comment and let me know how it goes!