Better Finances A Through Z

A to Z Guide of Staying Out of Debt

By Mike Peterson
In November 8, 2016

The key to staying out of debt is to keep a better handle on your finances through things like spending less, budgeting, and saving money. It takes work, but it’s not impossible. And you might be surprised by how many small things you can do to work toward a debt-free lifestyle.

Just for fun, I thought I’d break things down alphabetically, so here’s your official A to Z guide for getting – and staying – out of debt (and saving a little extra money, too):

Automate your savings. If you get your paycheck via direct deposit, you can set up an automatic bank transfer that moves some of your money from checking to savings each month. Pick an amount you can live with – even $20 or $25 is better than nothing – and set the date to coincide with every payday. You’ll probably never miss the extra money, but you might be surprised by how fast it adds up in your savings account.

Budget, budget, budget. A well-planned budget can also help you figure out exactly how much you can pay every month toward any existing credit card debt. If you don’t have a budget, make one. Just keep in mind that you should think of your budget as a work in progress – it may take a few adjustments before you get it right, so don’t get discouraged!

Cut the cord. One key to staying debt-free is spending less. And one way to spend less is to cut your monthly bills. Cutting cable is one way to easily free up an extra $30 to $50 or more each month (you can use a budget-friendly alternative like Netflix or Hulu to keep up with your favorite TV shows).

Drive less. Driving isn’t cheap. Between gas and general wear and tear, the costs of being a daily driver add up quickly. You can cut your driving expenses by doing things like carpooling or biking to work, using public transportation to run errands, or walking. The more money you can save on driving costs, the more you’ll have left over to pay down your credit card debt or build up your savings.

Forget the Joneses. Try to avoid comparing your stuff with other people’s  stuff – and spend less time with so-called friends who view spending as a competitive sport. Check out last year’s financial frenemies blog to read more about how your so-called friends can wreck your finances.

Go Generic. You don’t always have to buy the fancy national brand. Almost anything you can buy at a grocery store – from peanut butter to paper towels to pet food – is available as a less-expensive store brand. And in 99% of the time, there’s not a noticeable difference. Try swapping out a few national brands for their cheaper counterparts and see how much you can save.

Have a support network. Getting out of debt isn’t easy, and it’s not something that you can do in a day or two. It’s kind of like dieting, training for a marathon, or learning a new skill – it takes work, and it’s always easier when someone has your back. If you’re trying to improve your finances, look for help. Enlist a friend to help you stick to a new budget or join an online community for folks dealing with credit card debt.

Increase your income. The holidays are right around the corner – and if you want to make it through a season of dinner parties, decorating, and gift exchanges without piling up loads of debt, consider finding ways to increase your income. Ask for a raise, if you feel comfortable doing that. Or, consider getting a part-time job (retail stores are just starting to hire seasonal help for the busy shopping season). And if you’ve got a specific skill – like baking, photography, dog training, you name it – you might be able to make some extra cash selling your services.

Just say “no” to impulsive, unplanned spending. Staying out of debt means being in control of your impulses to spend money. Maybe you have a hard time getting out of the grocery store without an extra $20 in random purchases, or maybe you’re prone to online shopping when you’re bored. Now is the time to change your behavior: Send someone else to the store (or stick to a shopping list). Unsubscribe from sales emails or un-bookmark your favorite online stores. Do whatever it takes to avoid temptation.

Keep your cell phone. I know. The iPhone version something-point-something just came out and it’s got amazing new features and a bigger screen and it comes in two shades of black! Two! But it also comes with a hefty price tag, which gets even heftier if you finance it through your cell phone provider. (Trust me, there’s no such thing as a free phone). My advice: Hang onto your phone as long as you can. And when you absolutely must get a new one, go for a slightly older model. It might be missing a few bells and whistles, but your budget will thank you.

Love the library. Why buy books, movies, music, or video games when you can get them all for free from your local library?

Make a shopping list. Want to stay out of debt? Stop overspending. One surefire way to stop overspending is to make a shopping list every time you go to a store. Write down what you need and what you intend to buy. And if it’s not on the list, don’t buy it.

Negotiate a lower APR. If you’ve ever struggled with a large credit card balance, you know that interest is a killer. But if you’re in good standing with your credit card company (no missed or late payments), you might be able to simply ask for a lower interest rate. I can’t promise that you’ll get one – but you might be surprised, and the worst that can happen is they turn you down. It’s worth a try.

Opt out of sales emails. Remember what I said about not overspending? Tempting emails about flash sales or online-only discounts can quickly derail your budget – and if you add one-click ordering or a stored credit card number, and you’ve got a recipe for debt and financial disaster. Unsubscribe to tempting emails. And if you’ve got your credit card on file with a favorite store or two, take it off!

Pay more than the minimum. Paying the minimum balance on your credit card is s surefire way to stay in debt. If you’re serious about getting out – and staying out — of debt, you’ll need to step up your payments. A budget can help you figure out how much you can afford to pay. The higher your payments, the faster you’re out of debt.

Quit smoking. I’ll spare you the lecture on the numerous health risks associated with smoking. I’m sure you’ve heard them all before. But I will point out that, in addition to being dangerous, smoking is expensive. Let’s say a pack of smokes costs $8 (that’s about average). If you smoke a pack a day for a year, you’ve just spent close to $3,000. That’s a lot of money to spend on something that’s terrible for you anyway.

Remember your reward points. If you’re good at using credit cards responsibly and staying out of debt, you can use cash-back cards to knock a few bucks off of your balance. If travel is more your thing, there are tons of credit cards out there that give you discounts on airline tickets or hotels.

Sell your stuff. Take an hour or two to go through your closets, basement, or attic and gather up anything that you don’t really use, but that someone else might want. You can you’re your unwanted items online on sites like eBay or Craigslist, or in-person at garage sales, or consignment stores. Use the extra money to pay off debt or add it to your emergency fund.

Treat yourself – in moderation. Being debt-free doesn’t mean living a life of total deprivation. What it does mean, though, is learning to spend money responsibly. Give yourself a little budget for the occasional splurge. Just remember that “splurge” doesn’t mean “buy anything you want any time you want” – and it doesn’t mean using credit cards to buy things you can’t afford.

Unlike and unfollow social media “bad influences.” Financial frenemies exist on social media, too. They’re the ones constantly posting selfies with their new $500 handbag or checking in at exotic vacation spots (strangely, they never talk about budgets, or money, or saving up for anything). When you see enough of this stuff, it gets all too easy to convince yourself that you, too, need a fancy new bag or a trip to Fiji. You don’t have to unfriend these folks completely, but you can unfollow them or hide their posts.

Visualize a debt-free life. If you’re not in debt, congrats! You’re already living the debt-free dream. But if you’re working on paying down a high-interest credit card, it helps to imagine what you’ll do when you’re 100% out of debt. Will you plan for retirement? Save up for a vacation? Remodel the bathroom? The possibilities are endless.

Waterfalls are good for your budget. I mentioned this earlier, but I’ll say it again: A budget is an absolute must for debt-free living. But there’s no “right” way to budget. There are a variety of budgeting methods out there, from the waterfall method to the 50/30/20 method to smartphone apps or good, old-fashioned pencil and paper. Try a few out and see which ones work best for you and your financial goals.

X-rays and checkups are good. Self-care – including things like dental X-rays and cleanings and regular checkups are good for your health – and your wallet. Staying on top of your health can help you avoid costly treatments down the road.

You don’t need the biggest, most expensive house. No doubt you’ve heard the term “house poor.” It’s what happens when you choose to purchase the biggest house you can buy and take the largest mortgage that the bank will approve. Nearly all of your income goes to house payments, and you have next to nothing left over for living expenses, savings, or emergencies – and this is almost a guarantee that you’ll have debt problems. There are a lot of benefits to home ownership, but only if you choose a house you can truly afford – don’t overdo it.

Z . . . Okay, I give up. I don’t have anything for Z. Maybe I should have called this an “A to Y” guide.

Let’s move on, shall we?

So, I might not have a good piece of credit advice for the letter Z – but I do have a final tip for anyone interested in staying out of debt: If you need credit card advice or have questions about credit scores, budgeting, or credit card payment strategies, you can always reach out to Debt Guru. Conact the Debt Guru team today for a free debt relief consultation.

Mike is the author of “Reality Millionaire: Proven Tips to Retire Rich” and he has been published in a variety of local and national publications including Entrepreneur Magazine, Deseret Morning News, LDS Living Magazine, and Physicians Money Digest. He holds a B.S. in business administration from the University of Phoenix.

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