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You might wonder how the other half lives if you’re like thousands of other Americans in debt. After all, it’s not like you planned on going into debt. It could have been a few bad decisions that snowballed, and now you’re in over your head.
There’s a lot to learn from people who live a debt-free lifestyle. Even if you have some debt, following how these individuals spend and save their money can be an eye-opening experience and help set you on the right path to eventually being debt-free.
1. Set Goals
According to financial planners, individuals who have set clear monetary goals and are actively working toward them tend to have a better relationship with debt. Sitting down with your partner and discussing where you want to be in 5, 10, or 20 years can put you on the same page and start you on the right path.
If you’re unsure where to start, check with your bank or make an appointment with a financial planner to get yourself on the road to financial freedom.
2. Live Within Your Means
People who successfully live without credit card debt often live a modest lifestyle. That means they live in a home that adequately suits them, don’t splurge on impractical items, and understand how to find good deals while maintaining a happy lifestyle.
You can still enjoy a night out with friends or buy a new video game; you just have to understand that you’ll need to sacrifice another part of your budget. It’s a delicate balance, and compromise allows you to save while occasionally affording luxury items.
3. Wait to Buy
One of the easiest ways to avoid impulse buying with a credit card is to sit back and wait a few days. That is especially effective with big-ticket items, like a fancy new television, a new wardrobe, or booking a vacation.
Taking a breather often means finding the item for a lower price or deciding you no longer want it. Either way, you save money and avoid putting a balance on your credit card.
4. Delete Stored Payment Options
With online shopping becoming increasingly convenient, many consumers store their payment information on their favorite websites. This makes purchasing recurring items as easy as clicking a “purchase now” button. While this might be practical for everyday household items, it can make impulse buying too easy.
Like the previous entry, deleting your information forces you to evaluate what you want to buy. If your wallet is across the room and you don’t feel like getting up, you likely don’t need to spend the money on whatever you’re looking at.
5. Pay as You Go
One of the easiest ways to live without a credit card balance is not to let one accumulate. Responsible credit users have been known to pay off their bills at the end of the month or sometimes even at the end of the day.
If you use your card to build rewards, you can quickly pay off what you spent during the day before you go to bed each night. Consistently doing this will avoid a balance and provide one less bill to pay at the end of the month.
6. Pre-pay Your Credit Card
If you adhere to a strict budget each month, you most likely have a budget for your credit card usage. Savvy financial planners encourage clients to pre-pay their credit cards the amount they have budgeted for the month. This will help you stick to your budget and let you know your purchase credit balance.
If you spend too much each month, you need to re-evaluate your budget or start questioning your spending.
7. Pay With Cash
What better way to avoid credit card use than to never use it? Constant credit card use can leave you questioning how much you actually spent. Using cash can make you more conscious of how much money you spend and how much money you have left.
A weekly trip to the ATM for a cash withdrawal can be your way of giving yourself a weekly allowance. If you check your balance in your wallet or purse regularly, you’re less likely to overspend.
8. Shop Generic
Whatever you’re shopping for, the odds are there is a cheaper alternative elsewhere. That is true with restaurants, clothes, cars, electronics, vacations, and experiences.
A common theme among financially independent people is that they don’t live a lavish lifestyle. This could mean driving a Kia instead of a BMW, dining out just once a week, or choosing an Air BnB over a luxury 5-star hotel. These sacrifices can make all the difference in the long run.
9. Have an Emergency Fund
An emergency fund is the easiest way to avoid using credit cards for unexpected bills. Before you even consider opening up a line of credit, you should save enough money to cover your living expenses for three to six months if you were to lose your job or experience a hardship.
This fund will be there for larger purchases, and you’ll avoid using your credit when you can’t afford these harsh curve balls life throws your way.
10. Stick to Your Budget
As you grow in your career, you might be lucky enough to receive a promotion with a raise. That’s awesome. You’ll have more money to save towards retirement. But you might be tempted to change your budget to allow you to buy more stuff you might not need.
While it’s perfectly fine to buy yourself something nice, financial experts urge their clients to stash that extra salary in an investment fund or pay off any current debts they might have.
11. Meal Prep
One of the many traits you can pick up from frugal spenders is avoiding unnecessary purchases. Some everyday expenses that you can avoid are getting your coffee at a coffee shop, eating out for lunch multiple times a week, or buying bottles of water.
A cup of coffee or a meal at a restaurant can cost upwards of $25 each day. Doing this a couple of times a week can add up to hundreds of dollars each month.
Making your coffee at home and meal prepping for the week keeps that extra money in your pocket. You can use that money to help build up your emergency fund or add to your investment accounts.
12. Track Your Progress
Constantly tracking your progress toward your goals can help you modify and tweak your budget to reach the finish line faster. Let’s say, for example, your goal is to save enough money for a down payment on a house.
Watching that number grow can motivate you to stick to your spending habits. Building these responsible traits will help you properly manage your money and stick to that debt-free lifestyle you’ve almost mastered.
13. Increase Your Income
Wherever you are in your career, you should be driven to increase your income. Whether looking internally or checking the job market for career advancements, you should always try to make as much money as possible each year. Gone are the days when workers stayed loyal to one company and retired with a pension.
Nowadays, workers are more likely to bounce around and seek opportunities that better themselves and the families they support.
14. Be Patient
One of the most complex parts of getting out of debt is remaining patient. Deleting years of accumulating debt can be a long process, but sticking to your plans will make it as easy as possible.
Check in every month to watch that balance slowly disappear. Just like watching your savings grow, it can be motivating to watch that number shrink, even if it is only by a little bit each month.
15. Have a Good Attitude
One of the best ways to avoid debt is to have a positive attitude towards money. When you appreciate what you have, you’re more likely to feel less inclined to overspend on things you don’t truly need.
Before you get out of bed each morning, think of something you’re grateful for. This could be your spouse, your kids, your pet, or the fact that you have a roof over your head and a refrigerator full of food. Being rich in quality of life will only help you in your financial quest.
