3 Tips to Stay Out of Debt
Debt is a reality in our lives. Whether you’re dealing with student loan debt, credit card debt, a mortgage, car payments or another type of financial debt - I can guarantee you’re not alone. We often hear about “good” and “bad” debt - whichever you may have it’s still debt.
Although, what a majority of us are trying to do is stay out of it. Keep yourself out of debt as much as possible should be a financial responsibility you’re doing for the sake of you, your financial freedom, your future partner and kids. Because, let’s be honest, who wants to create a life with someone bringing tens of thousands of dollars of debt onto the table.
Let’s dive into the top 5 important guidelines to keep yourself in minimal debt and ideally out of debt. Keep in mind there are big milestones that will bring on debt - such as buying a house, starting a business (sometimes) or buying a car; we will dive into those later.
1. Live Below Your Financial Means
This is simply put going to be the easiest way to keep yourself out of debt and begin saving. You must live under your financial means. You need to do the work to understand what this means for yourself, most people won’t know this off the top of your head.
Understand how much money you are bringing in as income every month and how many expenses you have going out. Expenses meaning bills, utilities, food, gas, groceries, entertainment and travel. To break it down simple - map out your monthly income and your monthly expenses, the expenses you cannot live without.
Expenses you cannot live without are: Rent, utilities, phone/wifi bill, car, gas, groceries are the top few.
2. Be Realistic & Stick To It
Do not be spending above your means. As mentioned above this will be the most important reminder to stay out of debt. Being realistic and knowing what is realistic for you. You may want the finer things in life or a new car, phone, wardrobe or apartment - but this doesn’t mean you can have them all this second.
This is where self control and being realistic is key and most important. Credit institutions, apartment buildings, car dealerships and retail stores are going to do everything in their power to make you cave. Whether it means giving you an incentive, “deal”, best credit card offer or “long-term savings” - do not give in.
If you don’t have the self-control, do not open the credit card.
If you don’t have the income to afford the nicest car, do not drive it off the lot.
Now, obviously no one can really hold you to this. If you decide to spend $10k on your retail credit card that $10k of debt is for you to handle and pay off - everyone else just keeps living. But I can guarantee the financial burden, stress and regret won’t be eating away at you when you’re living in your apartment and driving the car you know you can afford and don’t have second thoughts falling asleep at night.
3. Accept You Can’t Do It All (For the Time Being)
Having the financial freedom to do anything and everything you want is maybe what you’re aiming for. And maybe you have the luxury to do this from the beginning and continue this way through life.
Although, for those who are actively practicing a budget, saving, paying off debt and living their life, you may not have the opportunity or financial ability to go to every social gathering, vacation, trip, family function, night out and weekend getaway.
A way to buckle down, stay out of debt and be financially free is to make good financial decisions. Which also comes with understanding and accepting a $100 dinner every weekend isn’t going to get you to your financial goals as soon as you may be hoping for.
A $1,000 trip to the Bahamas may sound enticing but it’s important to look at the other ways you are “treating yourself” as well. Is this your big trip of the year? Can you financially afford 5 trips a year at this cost? Are you living luxurious in your every day life with your monthly expenses that a big trip like this doesn’t make much sense?
You have the ability to make financially responsible decisions and you know what you should and shouldn’t do. No one has to tell you this. You know what can keep you out of debt and you also know what can put you into debt just as easily.
I’m not saying you need to say no to social events. I’m saying have a cocktail at home so you don’t need to spend the $10-20 out at the restaurant. You can still go on 5 trips a year but make 2-3 of them places of friends or family so you don’t have to pay for stay.
Don’t limit your life and don’t limit your fun BUT be smart and take your own advice and do what you know you should be doing.