Living debt free might seem like a dream to many, but with some easy steps it can become a reality. While it will require a bit of commitment and dedication, living a debt free lifestyle has a number of benefits including being able to save more easily for future goals, and being duly prepared for emergencies. Financial freedom affords a wealth of luxuries and choices and you don’t have to be rich or famous to obtain it.
Wants vs. Needs
Marketing is so good these days that your wants often feel like your needs. So it’s vitally important, if you are to obtain a debt-free lifestyle, to determine the true difference between them both. Spend several days or a week tracking each of your expenditures like regular bills, impulse buys, anything that you put your money toward. At the end of the week, examine it for items that could easily be excluded or substituted with less costly alternatives. You don’t have to go scorched-earth but staying as objective as possible could save you anywhere between $5 and $50 a week.
Cut What You Don’t Need
When you live below instead of at or above your means, you’re acclimating yourself to living more mindfully while also funneling your wealth where it’s needed.
- Do you need all of those streaming subscriptions? Cut the ones you don’t and find free ones you can enjoy just as much.
- Research cheap car insurance quotes to save money on car insurance and put that money towards debt to get you closer to your debt-free living goal.
- Have a lawn service but want to get out there yourself? Purchase a used mower and other garden/lawn tools and have at it. Services can cost quite a bundle.
- Like lighting up the house at night? While it may create a nice, comforting ambiance, turning lights on only when you enter a room saves money.
Awesome! You got a raise. Or an inheritance or a big income tax return. While your first impulse might be to run out and buy that new 65” television, take a step back. Most people adjust their new (better) incomes or savings with an increase in spending. This, essentially, keeps you where you were all along. With no net gain. If you received a 10% wage raise, take that extra dollar amount per cycle (or most of it) and directly funnel it a dedicated savings account.
Bad Debt vs. Good Debt
It’s a lot like good cholesterol vs. bad cholesterol. You’ll want to change your habits to get rid of the bad but keep the good because, well, it’s good. What constitutes bad debt? Credit cards and auto loans are all bad debt because they are not working for you. They often come with high rates of interest. Good debt, however, such as a student loan or mortgage, likely has a much smaller interest rate and improves your life in financial and non-financial ways.
Learn to Sacrifice
While it may be popular for people to espouse a “live in the moment!” attitude, it’s not necessarily a commitment toward your future financial independence. Learning to sacrifice things like an annual vacation or car upgrade will put more funding toward paying off debt and bring you closer to debt-free living.
Start an Emergency Fund
You might be doing all the right things and then one leaky roof or vet bill later and you’re back exactly where you started. Starting an emergency fund for situations that require immediate out-of-the-blue funding will help keep your main savings – and sanity – intact. Work toward a fund that can keep all of the wheels turning for at least six months, just in case you become unemployed or some other crisis strikes.
Write Down Your Life Goals
When you know what it is you’re saving for, you’re more likely to save. Write down your life goals, and be as specific as possible. How much money do you want to have in your accounts by a certain age? What does financial freedom look like for you? Is your goal to take one exotic vacation every year? Remembering why you are altering your spending habits and visualizing the payoff will set you more securely on the right path.
Be Aware of Impulse Spending
There’s a good reason those chocolate candy bars are there at the checkout. They are tempting and retailers are banking that you’ll grab one without much thought. Becoming more aware of impulsive purchases will put you back in the driver’s seat. When you see yourself reaching for an item you don’t need, stop and count to ten. Refocus on the task at hand and move forward.
Mastering the art of debt-free living doesn’t take a college degree; it simply takes will, patience, and a bit of time. When you become used to the adjustments, you’ll find financial freedom at your fingertips.