Getting out of debt is one thing, staying out of debt in another. After you pay off that last bill, you should try to stay on the budget and lifestyle you were maintaining while paying off your debt. That extra money can now go to savings.
So how do you do it? Follow these tips.
1. Don’t spend more than you earn
You can never maintain a debt free lifestyle if you spend more than you earn. If we examine why and how people fall into debt, we will find that this is the root problem – people spend more than they earn.
While this all sounds like common sense, many people don’t practice it. Here’s how to make it easier:
- Set up direct deposit to a savings account. If you don’t see some of your money, you won’t be as tempted to spend it.
- Set up a goal. If you’re working toward something, you’ll be more excited about saving. Better yet, make it a competition with your spouse or family member.
- When balancing your checkbook, make “zero balance” not be zero. For example, start with $200 and increase $50 every month. You’ll have a lot saved at the end of the year!
2. Track your spending
Needs first, then savings, then wants: that’s the spending rule you should live by. The only way you’ll know if you’re following this rule is if you track your spending.
Look at your last bank statement. Make a column and write in what each expense counts as. Then, calculate the amount of money for each category. You’ll have a better idea of where your money is going when you’re finished.
3. Wait for a sale
When you buy on sale, you practice two things: patience and thriftiness.
When it comes to fashion and gadgets, this rule is a must to follow. It’s easier than ever to do so now: you can download an app that lets you scan barcodes to see if the item is cheaper anywhere else nearby.
If you’re shopping for groceries or other household goods, it’s not as easy. Fortunately, there are also coupon sites that can help you out:
4. Take care of yourself
A quick way for you to fall into debt is by not taking care of your health. One hospitalization can ruin everything that you’ve worked so hard for.
Eat a health diet, exercise and take some time to relax every so often. Go to the doctor for a yearly check-up to ask questions and make sure you’re not missing something.
5. Live a simple life
You cannot enjoy what you don’t have, so focus on getting the best out of what you do have. Here’s some wisdom from Lao Tzu, “Be content with what you have; rejoice in the way things are. When you realize there is nothing lacking, the whole world belongs to you.”
Instead of going out and spending money, find things that are free or cheap to enjoy. For example:
- Learn how to cook
- Go to a park
- Find free community fairs and activities
- Visit your local library
Staying out of debt requires a personal commitment to change your lifestyle. Unless you do so, incurring debt will just be a vicious cycle.
Kristen Francis Willis, a financial consultant, originally wrote this post in July 2013.