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A debt-free life may seem like a fairy tale for Americans struggling with credit card debt. Many accept the rising interest rates as part of life and something they simply have to deal with. Fortunately, that’s far from the truth. A few simple practices can help people achieve the dream of living a debt-free lifestyle.
1. Know Your Balance
Before you pay off your debts, you need to add up how much you actually owe. Knowing your balance will help you build a budget to accomplish your financial goals. You can even consider a debt consolidation program, so you have one round number to pay off instead of multiple balances.
2. Set Goals
Setting obtainable and realistic goals will set you on the positive track for financial freedom. It will also be the building block in how you plan on working towards those goals. Put together a plan with daily/weekly/monthly ways you intend to tackle the problems standing in the way of getting to that financial freedom.
3. Make a Budget
After clearly planning your goals, you need to create a budget. A proper budget will give you a clear picture of how to spend your money wisely and effectively. Make sure you keep your budget fluid and allow for small changes as you get comfortable with it.
4. Skip a Night Out
One of the easiest ways I know of saving money is by avoiding going out all the time. I always try to persuade my friends to have small gatherings at home for movie/game nights instead of spending money at a crowded bar. I’m not advocating being a hermit and never leaving home, but staying in now and then is a great way to save some of your hard-earned cash.
5. Avoid Impulse Buying
One of the things I struggle with most is impulse buying, especially with convenient companies like Amazon. I have to remind myself to step back and wait a few days. Most of the time, I can find the item for a better price or realize it isn’t something I really need. Either way, it saves money and teaches me discipline.
6. Erase Saved Credit Cards
This is another way I avoid impulse buying. I delete all the stored credit cards from my favorite sites, making purchasing items more difficult. I hate to sound lazy, but if my wallet is in another room and I don’t have a saved card on file, it gives me time to rethink my decision. Odds are I either forget about it or buy it later after I have mulled over the pros and cons of the purchase.
7. Pay off Credit Purchases Daily
I know many people who try to pay off their credit card purchases at the end of the month. That’s a smart move, but what if you accidentally overspend that month? Now, you either need to take the cash out of savings or carry a balance. Instead, try to cover your purchases daily. This will help you track your spending and avoid piling up a debt and incurring interest.
8. Use Pre-Paid Cards
After you have set your budget for the month, you might consider buying a pre-paid card for daily purchases. This way, you can keep track of your spending, and if you run out of money, you know you need to re-construct your budget. Also, knowing you have a set amount on the card will avoid large spending sprees on unneeded items.
9. Use Cash
This idea is similar to the pre-paid card and works just as well. Ditch the bank cards and pay for everyday items the old-fashioned way: cash. A simple look in your wallet or purse will tell you exactly how much money you have left for the week. Not knowing your balance on a card can result in easy overspending and ruining your budget.
10. Automate Your Savings
Set up direct deposit with your bank, where a chunk of your salary goes directly to savings or retirement funds. If you don’t see it, you won’t spend it. Building up savings is great for an emergency fund in case you have a month where you overspend and need to pay off that credit card with high interest.
11. Don’t Carry a Balance
If you overspent your budget, pay it off immediately. This is where the emergency fund comes into play. Paying off remaining balances saves you money in the long run by avoiding interest rates. Keeping a running balance is one of the worst things you can do. It affects your credit score and takes money out of your pocket every month.
12. Keep the Budget Set in Stone
Let’s suppose you got a hefty raise in your salary at work. You might consider changing your budget to reflect the extra money you have coming in. Experts warn against that. Sure, you can treat yourself occasionally, but a better option is to send that extra money directly into a retirement fund or pay off balances on your credit cards.
13. Get a Side Gig
If you’re like thousands of other Americans and have found yourself in credit card debt, increasing your income may be the best solution. Getting a part-time job on the weekends can be beneficial in paying down that debt. Commit the entirety of that paycheck to chopping down those interest bills. Plus, if you are working, you won’t be spending. That’s a win-win.
14. Track Progress
It’s essential to track your progress as you slowly become debt-free. Once a month, review your finances and bills to see if you’re making a dent in your payoffs. From there, you can flex your budget to achieve your goals.
15. Keep Your Eyes on the Prize
Getting out of debt and staying out of debt can be stressful. Remember to keep calm, focus on the long run, and celebrate small victories. It will not happen overnight, so stay positive, be flexible, and stick to your budget to enjoy the debt-free lifestyle you deserve.
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