Detailed below is how you can achieve a debt-free life.
Detailed below is how you can achieve a debt-free life.
LIVE ON LESS THAN YOU MAKE
This tip sounds simple, but it is not for many people. Most want to keep up with the Joneses. Trust me, the Joneses are not having fun. They are actually broke!
If you make $100, then only spend 80% or 90%. Never spend it all and certainly never spend more. If you are spending more, that indicates you are most likely borrowing to keep up.
STICK TO A BUDGET
Sticking to a budget, once you have detailed it out, is what a debt-free lifestyle feels like. A budget is not a restriction. It actually is permission to spend.
Setting your budget with reasonable spending targets and living within those targets is what freedom to spend feels like. Create enough flexibility.
PAY CASH FOR PURCHASES
When you pay cash for your purchases, actually, you create an environment that will cause you to spend less. When you pull out cash and count it out, it hurts your brain because you actually feel the act of spending.
Using plastic is not the same. Swipe the card and you are done. The money comes right out of your account or if you are using a credit card you will see the bill later when the purchase is just a memory.
SEEK WAYS TO REDUCE EXPENSES
Always look for a more cost-effective way to purchase needed items. Shop when things are on sale but make sure they are really on sale. Many times prices are marked up and then reduced.
ELIMINATE ALL DEBT
Those debt payments are only lining the pockets of the big banks or finance companies that are charging interest in the 15% or more range. Really? In most cases, you are paying for purchases for items long gone.
Do whatever it takes to eliminate these debt payments and put that money back in your pocket. Pay cash. Get off of the merry-go-round.
AUTOMATE YOUR SAVING
This strategy is the key to accumulating wealth. Use the pay-yourself-first method. When you set up automatic savings that comes right off the top of your pay, you will never miss it.
If your company has a 401k or a similar retirement plan, set up a percentage to go directly into it. This way, you do not take it home.
These savings should be invested in good solid mutual funds returning at least 10%. This is a long-term strategy.
CREATE AN EMERGENCY FUND
The thought here is it will rain almost 100% of the time. An unexpected expense will come up. These are items not included in your normal monthly budget.
An example could be an unexpected car repair, or perhaps a job loss.
Prepare beforehand and create a fund with at least three months of expenses, with a goal toward six.
I call this my “peace of mind fund.” It lets me sleep at night.
HAVE LONG TERM GOALS
Setting goals is perhaps the secret formula to achieving success. You need to have professional, financial, family and spiritual goals.
A well-balanced set of goals will be your roadmap. You don’t take a road trip without a map, so don’t go through life without a map. Create long-term goals, and short-term goals to get you to your long-term goals.
Make SMART goals (Specific, Measurable, Attainable, Relevant and Time Bound). And make sure they are in writing. An unwritten goal is just a dream.
SHOP AROUND
Never make the impulse buy. You will overpay! Do some research. Are you getting the best price for the quality product?
Or are you just getting a bargain and it is cheap, but you will buy it three times because it won’t last. Many times it is better to spend a little more and get a higher quality product and only buy it once.
There is no doubt that other strategies can be used to live a debt-free life. These are the tried and true. What is your favorite? Or do you have one you use that is not listed here?
So why wait? Get started now! QCBN
By Steven Calabrese, CPA
Steven Calabrese, CPA is the CFO of Polara Health. He also is the owner/operator of a website known as thebiweeklyadvisor.com, where topics such as budgeting, investing, paying off debt and goal setting are discussed.
