4 Simple Steps For Living A Debt Free Life

Getting out of debt is only half the battle; staying out of debt can be almost as problematic for many people.

After all, when you’ve lived on a tight budget for months, or even years, to become debt-free it’s tempting when you finally hit zero to feel that the pressure is off.

Finally you can start thinking about vacations, about upgrading your tired old car or about moving to a nicer property.

But hang on there just a moment.

If you just rip up the budget and start spending again like you did before you first got into debt there’s a significant risk you’ll end up exactly back where you started. And nobody wants that – least of all you.

No, if you want to live a debt-free life there are a number of elements you should be considering:

Refuse New Sources of Credit

If you’re free from debt it’s tempting to see the offer of a shiny new credit card or a loan as good news.

However old habits die hard, and if you’ve struggled with debt in the past there is a fair chance that you will struggle again with debt in the future.

Like an ex-smoker accepting “just one” cigarette these things have a nasty habit of rapidly spiralling out of control. So say no to new forms of credit – and say no to temptation.

Track Your Spending

Just because you now have no debt doesn’t necessarily mean you start spending freely. Even people without debt have limits on their finances; overstep the mark and you could find yourself having to dip into credit to make ends meet.

Whether you maintain a full-blown budget or just keep a broad eye on your spending is up to you. The key is to measure and monitor your spending. Doing so will start to give you a “feel” for your spending.

After years of combing through my bank accounts at the end of each month I can now “sense” if I am overspending.

This provides a useful check on my spending and insures I don’t get myself into trouble.

Plan Your Finances

One key reason why people get into debt in the first place is that they fail to plan ahead. Their car dies and they don’t have the money for a replacement. They need a car for work so they end up having to purchase one on credit. Sometimes the loan lasts longer than the car itself.

Compare that to someone who knows they’ll want a new car in the next year or two and therefore puts money aside each month for this future purchase. When the time comes they’re fully prepared for the changeover.

Or think of the amount of debt many people get into at Christmas.

It really makes no sense; Christmas comes at the same time each year so it should be easy to plan for.

Just put a little money aside each month leading up to December and when it’s time to do your Christmas shopping you’ll be fully armed.

Try to think ahead to the future and look at bigger purchases like properties, vacations and birthdays; those events that seem to “surprise” us.

Then set targets to ensure your spending is under control and you can meet your financial wants without relying on debt.

Maintain An Emergency Fund

An emergency fund is an easily-accessible source of cash which you can dip into in times of emergency.

Two great examples could be if your washing machine packs up or your car needs emergency repairs.

We don’t have a crystal ball so factoring such expenses into our budget is next to impossible. This is where emergency funds can come in.

Personally I maintain an easily-accessible fund equivalent to around three months of expenses. That way even if I lost my job I wouldn’t be in crisis. But if a surprise purchase crops up it means I have access to funds to cover it without having to worry about using a credit card or a loan.

Take Pleasure in Denial

I believe that one of the problems that we in the West have is unrealistic expectations. We expect a new car, a nice house and all the “trimmings” necessary. Heck, even our kids expect $500 iPads and expensive games consoles. All this luxury costs money – and it has to come from somewhere.

The vast majority of the population maintains these unrealistic expectations of being able to have whatever they want. If it has to go on credit then so be it – but you simply must upgrade to the new iPhone today – the previous model you’ve only had for months is now not fit for purpose!

As a result I believe that a key success trait for living a debt-free life involves changing our expectations. Try to adopt a mentality where money in the bank is worth more than money in a shop till. Take pride in managing to avoid unnecessary spending, and in building up savings instead. Every time your savings account goes up you should get more excited than when you buy those new shoes or that shiny new laptop that you don’t need.

Learn To Appreciate What You Have

The final step in living a debt-free life is perhaps the most important of all; learning to truly value what you already have. Take a look around you now and consider your home; all the belongings it contains. Look at the furniture, the TV, the computer you’re using right now. The cell phone. The kitchen full of gadgets.

Then consider the non-physical things. You have heat and light when you want it. You have friends and family. Hopefully you also have your health. You have passions, interests and things to look forward to.

Remember that no matter how “poor” we in the West feel it pales in comparison to how millions of people around the world are living right now. There are millions of people who would give anything to have what you have right now, and live the life you live right now.

Let all that sink in.

When you start to appreciate what you already have, upgrading or adding to your lot suddenly seems rather less important.

So try to start seeing your life with fresh eyes. Look at all the good around you and immerse yourself in it. Re-watch those classic DVDs sitting on the shelf. Re-read those books you held on to. Arrange some quality time with your relatives. Take a long walk along the beach with your kids.

Happiness doesn’t have to equal spending money; focus on valuing what you have and you’ll find far less temptation to spend money and get into debt.

What are your top tips for living a debt-free life? Please leave your thoughts in the comments section below…