Falling into debt is easy to do, but overcoming it isn’t quite as simple. Unfortunately, in today’s world, consumerism and high inflation costs have created a society where being in debt is more common than living without it. While people assume that living debt free is reserved for the wealthy, it doesn’t have to be. With a few lifestyle changes and a proactive approach to your finances, you too can enjoy financial freedom. To help, here are some tips for mastering the art of debt free living.
5 Ways to Master the Art of Debt Free Living
Getting out of debt and staying out of debt requires some dedication, but it is possible. Start by implementing these five things to help you live a debt free lifestyle. Just remember, it doesn’t happen overnight, so take your time, don’t give up, and try to be patient.
1. Create a Budget
One of the most effective ways to live debt free is to create a budget and stick to it, regardless of any changes to your income. Since we tend to spend more money when we make more, a perpetual cycle is created. Spending more when we have more is one of the easiest ways to lead to debt, especially if your income drops again. To create a sustainable budget, spend a month or two to meticulously track every dollar that you spend. There are plenty of mobile apps that allow you to do this easily and quickly, or you can carry a notepad and write things down. This allows you to see what you’re spending and where you can make changes. Once you’ve done this, you can create a more targeted budget. Include any recurring expenses and clearly separate wants from needs.
2. Separate Wants from Needs
You may need coffee in the morning, but you don’t need to spend $6 to drink it. You can make coffee at home and save upwards of $30-40 per week. Go through your spending habits and highlight the items you spend money on that you don’t necessarily need. You don’t have to completely eliminate them but being cognizant on these purchases can help you cut back without feeling like you’re depriving yourself. You can include wants in your budget as long as you still have room to pay for your needs, make large enough debt payments, and contribute to an emergency fund.
3. Pay Off Bad Debt
One of the only types of “good” debt is a mortgage as it helps improve your credit score and can be a profitable investment. However, auto loans, most student loans, and credit card debit are all considered bad debt. Focus on paying these off first. The faster you pay off bad debt, the less you’ll pay in interest over time. If you’re struggling, consider talking to your creditors to try and negotiate your interest rate. In some situations, especially if you have strong payment history, you may be able to lower it. This will help you pay off the balance faster and avoid wasting money.
4. Make Sacrifices
Paying off debt and living debt free means that you’re going to have to make some sacrifices. This may mean prolonging a vacation, driving an older car, or living in a smaller home. Be willing to make these sacrifices as they will pay off in the future.
5. Build an Emergency Fund
Creating an emergency fund is one of the best ways to make sure that you don’t fall back into debt later. Start small and work in contributions to your monthly budget. The ideal emergency fund is often enough money to last you about 6 months in case anything happens with your employment.
Traits That Help Master the Art of Debt Free Living
Another great way to master a debt free lifestyle is to focus on cultivating certain traits. Doing so will allow you to change the way that you view money, which makes it easier to maintain life without debt.
1. Drive and Ambition
Having the drive and ambition to set goals and work towards them is often paired with decreased rates of debt. This is because those who are goal oriented often make an objective decision to set financial goals and work towards them. This, in turn, causes you to thoroughly consider every purchase made, which can decrease unnecessary spending.
Just because it’s on sale does not mean you should buy it. Getting a good price on something that you didn’t need in the first place is still a waste of money. Follow your budget, make clear distinctions between wants and needs, and don’t fall for marketing traps. Remember, everything you buy can be converted into hours worked, so make sure that it’s worth your time.
One characteristic that increases your risk for debt is impatience. Those looking for immediate gratification can quickly rack up credit card debt, which causes higher interest payments and even more debt. Try to practice patience by creating a budget and avoiding frivolous spending. You may also want to implement a 24-hour rule. If you see something that you think you want, wait for at least 24 hours. Afterwards, if you still feel a strong desire to purchase it or if you still think you need the item, buy it.
Creating a strong financial future starts now. By contributing to an IRA, 401(k), or retirement fund, you’ll ensure that your debt free living continues throughout your life. Working with a financial advisor can help you create better budgets, increase your financial accountability, monitor your progress, and build a more stable future. To start planning for a debt free future, contact William Bevins today at [email protected] or by calling (615) 469-7348.
If you’ve recently gone through a divorce and are looking for guidance on financial planning, wealth management, retirement planning, and more, contact William Bevins. As an experienced financial advisor, he aims to properly manage your wealth so that it offers security for you and your family both now and in the future. Your financial journey begins with choosing the right financial advisor. Contact William Bevins today at [email protected] or by calling (615) 469-7348.