In the world of personal finances, how to get out of debt gets a lot of attention. But what about how to STAY out of debt for good?
There are some really fabulous lifestyle changes you can make to ensure that you are one that stays out of debt.
Maybe you are worried about how you are going to manage to stay out of debt once your debt is paid off so you don’t find yourself in the debt cycle ever again.
If you take anything away from this post it should that your success is directly related to your habits.
We are creatures of habit that is just how it is. Our brain enjoys doing the same things over and over again most brains hate change. Even when we know making changes to our habits would be good for us, we still hate it.
So to overcome bad money habits the best thing we can do for ourselves is to implement and create new money habits for our brains to adjust to essential we are retraining our brain. But make sure your new habits are ones that will have you reaching your financial goals.
When you finally decide to nip debt in the but for good and want to start your debt repayment journey there will likely be a lot of new habits you will have to create in order to be successful.
Clearly, you want to know how you can stop being bad with money, that’s a given. So in this post, I am going to share with you the new habits you can use and ways to make extra money to pay your debt off even faster. Let’s begin.
If you are wondering why it is crucial that you stay out of debt, you will also find the answer here.
1 | Girl, You Gotta Follow A Budget
If you are serious about getting out of debt the first thing you should be doing is getting control of your money and your spending habits.
If you are living without a budget what tends to happen is your money practically runs away from you and you have no idea where it went.
May your money is spent in big ways such as shopping sprees or big purchases, but it could also be trickling away from you each time you make a small purchase. Every dollar adds up.
Creating a budget means that you are making a plan for your money each month before you even get it. When budgeting you should think about long term goals and big financial goals that you want to achieve. Instead of putting around and losing valuable time you can get started right away working towards them.
Clearly, you will be able to see the money you have coming in each month from your job, and how much you have going out as expenses. Opposed to simply playing a guessing game and realizing you never have any money left at the end of the month.
There are a couple of different methods of budgeting that you can use.
The Zero-Based Budget
This budget is one of the MOST SIMPLE budgeting methods you could use. This is because all you have to do to start is make your income – expenses zero. No this has to be sound simple to you right now. Either that or your thinking this is too easy it will never work. Trust me though just shut those thoughts out and give it a chance. It is actually that simple to use. When you decided to work with a zero-based budget you will need to set aside time each month to plan where your every penny from the month will go.
Now I know you may be thinking now oh that sounds overwhelming and like a lot of work. But again, it isn’t! It actually isn’t complicated at all!
Start by making the categories you chose from yesterday’s lesson and decide on how much money you will need for each category.
2. The 50/20/30 Budget
50% of your income should be going towards your needs! This means the basics that you CAN NOT live without. This includes your housing, your utilities, food, and any transportation expenses. You should view this 50% solely as the things you NEED to live.
30% Fun Money
The 30% is to go towards expenses that are not considered essential but make up your lifestyle. This portion of your income should go towards entertainment, your phone bill, your Netflix or cable, hobbies, fitness, eating out, etc.
20% Your Financial Priorities
This is no doubt THE most IMPORTANT category in your 50/30/20 budget. This is where you can make your financial dreams a reality and secure the financial freedom you desire.
Personally, I like directing my money specifically so I use the Zero-Based budgeting method.
For instance, it can be really easy to say that you want to buy a house or go on you dream vacation but if you don’t take action a year or two will go by and you won’t be any closer.
Following a budget will allow you to specifically save for your goals each and every month. Which will essentially help you stay out of debt because you will have been saving for your goals instead of going into debt when the time comes.
2 | Only Buy Things You Can Actually Afford
In today’s world, we are encouraged to spend money on the things we want, whenever we want them.
Nowadays you can’t even go to the grocery store without being bombarded with clothes, makeup, toys, or electronics. Then we turn on the T.V. and are promptly welcomed with many different advertisements.
It is all around us we see people going on expensive holidays, buying the latest and greatest, and we just sit back because we have no clue how they are affording to live that lifestyle. When the reality is they most likely went into debt to pay for those things.
It is easy to see your friends buying expensive houses, new cars, and gadgets all of the time all while never going into debt. But if you aren’t there financially trying to keep up will only be detrimental for you and land you in debt fast.
And then you are stuck paying for it all. You couldn’t afford it in the first place so how are you planning to pay for it now? You know that simply paying the minimum payment is not the right choice but you don’t know what to do.
So instead of rushing out and buying something you want even if it won’t put you into debt you should first sit on it for a while and think it over. If you still want that item in a couple days or weeks time and you still can afford it go buy it.
Just remember you should only be purchasing items that you can actually afford right now.
3 | Live Well Below Your Means
Living within your means is one of those topics categorized as something easier said than done. And there is truth to that. The reality is if it were an easy task to live within your means we as a complete nation would not be crippled with a personal debt problem robbing us from financial freedom.
What does living below your means even mean though? For so many people out there this is a legit question with merit.
The simplest way I can explain this to you is, spend less money than what you earn. We have access to extra money often by simply swiping a card or by the click of a button, but the reality is not so simple.
If you look at the financially successful people you will no doubt see that they live a life that is well below their means which allows them to not spend their entire paycheck each month – which allows successful people to save large amounts.
And when I say large amounts I mean significantly large amounts. Does saving 50% of your income sound impossible? Well, believe it because it can be done.
If you want to get out of debt and stay out of debt, living below your means may very well be the key to doing so. You won’t be saving at all if you are consistently wasting your money each month.
4 | Actively Try To Expand Your Means
You might find this to be the opposite of living within your means, but the point I am trying to emphasize is that you don’t have to cut back on everything you love in life in order to stay out of debt.
If you are currently going through the process of paying off your debt, I think that you absolutely should be living below your means. Cause debt is an emergency you want it to be paid off as soon as possible. You are only continuing to hurt yourself by putting off your debt repayment and staying in debt for longer. You should be working as hard as you can in order to achieve your own financial freedom.
But what about once you have become debt-free?
Don’t put aside the option of expanding your means.
Some people may not agree with that statement – but really there is nothing wrong with wanting holidays if you can afford them when you work hard and have sensible expenses.
If your goal is to achieve a particular lifestyle then you should make it your goal and work hard and smart to reach it.
Why not increase your income in any way you can? Whether it is by increasing rates of services you already provide or working more, or by doing things that make you actually happy.
I have written about how to be frugal because I sincerely believe that if you commit to a frugal lifestyle it will almost immediately show you the things you need in your life to live happily.
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5 | Have A Savings
Most people find themselves in debt are in that situation to no fault of their own. Instead, it was due to an emergency situation that they were not well prepared for because they had no savings.
However, unfortunately, that is life, unexpected things happen that aren’t preparable. But if we do have a financial cushion we will at least have some help for these situations. Being somewhat prepared will make it much less stressful.
For instance, if you had the death of a relative in the family would you not prefer to not have to worry or stress about money on top of everything else going on?
Oh, and as an added benefit of creating savings if you put it in a savings account with a high-interest rate you will earn extra money for your savings.
Having a savings is essential to staying out of debt because when an emergency comes up instead of using a credit card or taking out a loan you will have money set aside
6 | Show Gratitude For What You Have
Being grateful for what you already have can sometimes be a struggle and easier said than done. However, becoming grateful for what you do have is something to strive for as it is one of the best things you can do for yourself, at any stage in your life.
This is hard because of the celebrity lifestyles we see on the tv and social media we are exposed to it daily. Which has cause aspiring to be like them to become the norm? It is important to remember when we see posts on Instagram that they are only showing us the material aspects of their life, not the negative aspects.
I know I have said it before and I will say it again, living frugally allows you to clarify and put into perspective your real financial goals and priorities.
Now it probably won’t be easy at first but it is very possible. Just stick with it.
It is normal when you start to cut back on expenses to start doing tasks for yourself instead of paying someone, ex. cooking meals at home from scratch.
Now it isn’t the easy way but t does allow you to be proud of what you accomplish as well as allow you to save money.
And as you become proud of what you accomplish in one aspect of your life you may want to incorporate other frugal aspects into your life such as walking uptown to do errands instead of taking the bus or driving.
Doing these things can help us slow down in life and realize the beautiful blessings that we do have. Everyone I’m sure has been guilty of not being grateful for what they have and just wanting more. The power of positive thinking is great and can leave you feeling content and happy with the things you already have in your life.
It is okay to desire more or different things than what we already have, but it is good to keep it in perspective and stay realistic to what we can actually achieve.
7| Have Multiple Income Streams
Along the lines of expanding your monthly income so you can live the lifestyle you want, you will find both increasing your income and having multiple streams of income will help this immensely.
The best thing about having multiple streams of income is if one disappears you will still be okay financial – especially so when you have savings.
Let’s say you have one job, what would happen if you got to let go due to company changes and your position was no longer relevant? No doubt you would panic very quickly wondering how you are going to pay your bills in the months to come.
But what if you had 2 streams of income? One was your regular day job and one that was an online side hustle, for instance, blogging? You wouldn’t be near as worried about how you are going to make your bill payments because you would still have one stream of income left.
That is the importance of having more than one income stream at any given time.
8 | Automate Payments
We’re super busy people and the ups and downs that happen in life often have us forgetting important things that we shouldn’t.
We’re human after all and we forget to do things, we do things late, and we mess up. One way we can prevent this from happening when it comes to our finances is to automate them. When your payments are just automated there isn’t even room for human error!
Seriously internet banking is the best thing ever!
And with it, there are no excuses for not having your personal finances organized and your payments automated – if you don’t already have internet banking I strongly urge you to do so now!
From your internet banking, you can very easily set up direct debits and standing orders to different companies or people, with specific dates for the funds to be transfers.
There should also be a place on your online banking for you to see all of your direct debit and transfers, this is very helpful when setting up your budget.
9 | Be Prepared To Adjust When Needed
This a very important aspect to successfully stay out of debt – and becoming financially free. You have to be willing to adjust!
Life happens and things happen sometimes bad and sometimes good. And having the ability to be adaptable when things happen will allow you to continue progressing to stay on track – or to create a new track to follow.
Normally what we decide we want to happen in 10 years’ time, is dramatically different from what we actually want once that time rolls around. With that said the best thing we can do for ourselves is to make the most logical decisions we can and to be as prepared as we possibly can be for what life throws our way.
10 | Set Financial Goals For Yourself
Paying off your debt is working towards a goal. Setting your goals allows you to stay motivated and inspired to keep your eye on the prize.
I love setting goals and achieving them, it gives me a sense of satisfaction knowing I accomplished something.
So its no wonder I feel everyone should have short term, mid-term, and long term financial goals set. We tend to avoid the fact that money is crucial in our day to day lives.
Do you want to travel the world? Or maybe move to another country? How about owning your home? Or going on an annual family vacation? Every one of those things requires money.
Your goals can be as big or small as you like after all they are unique to you! You can even use some of the goals that got you out of debt to help you stay out of debt.
The last thing I want you to do is obsess over money, I simply just want you to have goals that you can work towards.