If you want to learn how to live debt free, you’re going to love this article.
I know it may seem impossible to get debt free when you have mountains of debt that pile up more and more each month. It really does look like you’ll never pay it off in this lifetime.
But remember that a little bit every day goes a long way. And a little bit of debt reduction each day creates MASSIVE change down the road.
You need to create the right habits every day, and stick to it. You’ll then begin to see changes in the amount of money you owe, and slowly but surely, you’re mountain of debt will begin to melt away.
Below I’ve listed 15 useful tips to help you live debt free. They are incredibly powerful and I hope you really take in what you’re about to read.
Learn How To Live Debt Free With These 15 Amazing Debt Tips
- Find ways to make extra income
The most important thing you can do to get out of debt is to earn more money. The most popular way is to get a part time job. I don’t have to tell you it can be tough if you have a family and other obligations, but making more money can dramatically reduce your debt.
The honest truth is, you can live debt free with the rest of the tips listed below, but if you want to get to a debt free lifestyle faster, making more money is the fastest path.
I really like the idea of starting a online blog. You can work from home and the amount of money you can earn is sky high. High enough to replace your yearly salary, no matter what job you’re in. Making money online sounds crazy to people who’ve never explored it, but it’s absolutely doable.
2. Be willing to make sacrifices
At the heart of becoming debt free is sacrificing some of the things you previously enjoyed. It was these things that built your mountain of debt, and it will be the slaughter of these things that will get you out of debt. Okay, maybe slaughter was a strong word, but you get my drift 😛
Things like eating out when you could of had a similar meal at home for 20% of the cost. Or buying that nice top that you don’t really need but wanted it because it looked cute. This can add like $50 to your pile of debt. Or that cable bill that runs at more than $100 every month. Maybe you can start streaming your entertainment online for a lot less, or forget television all together and start doing other things with your free time, like getting a side job or making money with a blog.
You really need to look at your expenses and cut anything that you can live without. The more you cut, the less you spend, and the faster you’ll get out of debt.
3. Set specific goals on what you want to achieve
How badly do you want a debt free lifestyle? How fast do you want to achieve it? You will need to be aggressive in reducing your debt if you want to eliminate debt fast. Whatever your pace may be, you need to set a concrete goal of how much debt you want to pay off and in what amount of time. To do this, you need a budget.
4. Create a budget to achieve your debt free lifestyle
A budget is extremely important. In fact, it is absolutely necessary. Your budget will clearly outline how much money you have coming in and how much money you have going out. To live debt free, your goal is to have MORE money coming in and LESS money going out. This way, you’ll be building wealth instead of creating debt.
Your budget will also tell you how fast you can expect to pay off your debt. If its not fast enough, then you will need to look at either making more income or reducing more expenses. Or both.
Budgeting isn’t too hard. The only difficult part is tracking down your expenses as accurately as possible. I’ve written a guide on how to budget your money that you should check out.
5. Write down your debt free plan
Writing down your debt free plan does something psychological that is amazing at helping you stay on track. I recommend writing your goal on a piece of paper and sticking it on a wall somewhere you can see it every day. It will remind you of your plan and keep you honest. Don’t fail yourself. You don’t have anybody else to blame but you.
Your plan will be your steps taken to achieve your debt free lifestyle. You can write it down in any way you like. Bullet point works just fine.
For example, you can write:
- Spend maximum $200 on groceries every month
- Only eat out once every 2 weeks, max
- Buy no clothes for the next 6 months, unless absolutely needed
- Make a lunch every day for work
- Spend an hour a day (minimum) research how to make money blogging
Make a list that makes sense to you, and read it daily. Stick to it and don’t cheat.
6. Set up automatic savings
Something I’ve always done is pretend I make less money than I actually do. I routinely save more than 50% of my income, but this isn’t realistic for most people. What is likely more realistic for you is to pretend you only make 90% of what you actually make. So if you made $50,000 a year, pretend you only make $45,000. In other words, the other 10% cannot be spent no matter what. It doesn’t exist.
This way, this extra income can go to a savings account for an emergency fund, or go directly into an account that pays off loans and other debt you have.
This way of managing your income is incredibly powerful because you can’t spend what you don’t have. And that extra 10% is money you don’t have. And you’ll learn to make due with 90% of your income. To be honest, you probably won’t even notice the 10% is gone.
7. Spend money economically
I think most people get into debt because they don’t know how to spend money wisely. A night out for dinner and drinks here, buy a Playstation there, and spend $80 on a few cute tank tops because they were on sale the next day. This all ADDS UP tremendously. And then your pile of debt gets bigger and bigger… but you still don’t stop.
You need to reverse these spending habits and learn to buy things you truly need. You need to spend frugally. This just basically means this: Spend your money ONLY when you really need to. Buy things that get you A LOT of value, instead of instant gratification that lasts for a small amount of time.
For example, I spent a lot of money on a premium office chair for my room. It costed $350. This ain’t no chump change, and I could have easily bought a $99 chair. BUT, I use this chair every day and have been for the last 10 years. The comfort and value I still get out of it today is well worth the price tag I paid. This is the essence of spending money economically. And you’ll want to make these types of smart money decisions when you’re getting out of debt, and while your living debt free.
8. Be smart. Pay down your highest interest loans and credit cards
You likely have a few credit cards that owe money, and maybe other things like car loans, student loans, or a mortgage. The debt you want to pay back first is the debt with the highest interest rate.
I don’t like the idea of paying off debt with the “debt snowball” method, which says pay back the smallest debt first to get these little wins. In my opinion, forget that! If I can see I owe $10000 today, and the next month I owe $9500, that’s plenty of encouragement and “winning” for me.
You want to pay off your highest interest rate debt first because these debts are costing you the most money. They will usually be your credit cards, which can charge you a nice 20% interest rate. Getting these types of debt paid off as fast as possible will speed up your debt free lifestyle faster.
9. Use financial tools like debt consolidation and balance transfer credit cards to pay down debt faster
You may want to get financial help to lessen the burden of your debt. There are tools you can use to help you with that. A couple popular ones are debt consolidation, where a company will combine all your debt into one, and make it simple and easy for you to pay back, instead of having 10 different bills to pay every month.
Another popular way to help pay back debt faster is to apply for a balance transfer credit card. These credit cards charge 0% interest or very close to it. So you would want to transfer the balance you have on your 20% interest rate credit card to this 0% credit card. These 0% credit cards typically aren’t 0% forever. In 12-24 months or so, the interest rate usually rises. So keep this in mind if you explore this option.
10. Bargain hunt for deals like a mad person
You want to learn the art of deal hunting. This means hanging out on forums like redflagdeals.com or checking out flyers, or buying things in bulk. If you’re the type of person to grab things off a shelf without really looking at the price or considering where you can get this item for less, then you need to stop. Because this is the type of behavior that got you into debt.
Learn to love finding deals, sales, and hoard a little when it makes sense. You’ll see a lot of people with little money do these things. Not that it’s exclusive to them, but these people don’t have the option of buying what they want when they want. They know how to maximize the money they have, and when they see a good deal, they jump on it and buy more than they need for when they run out.
11. Learn to be happy with what you have
I think learning to be happy with what you have is essential to living debt free. Sure, you can aspire for big things, but being happy with what you got is incredibly powerful. Suddenly, you don’t need the nicest clothes, or the flashiest backpack, or more jewelry. You have a bunch of this stuff already, and you learn to make due with it.
At the end of the day, this all means you’ll be spending less money. And this extra savings will go to pay off debt.
12. Use what you have until it disintegrates
Well, maybe not until it disintegrates, but learn to use things until it’s virtually un-useable. Tools, clothing, computers, microwaves, you name it. Get as much life as you can from these things before you go buy a new one. It’s nice to buy new stuff, I know, but living debt free is all about getting the most out of what you currently have.
13. If you must take on additional debt, make sure it’s the good kind
There are times in life that you just need to spend money and there is nothing you can do about it. For example, your car breaks down and you need to decide if you want to get a crappy beater to get you through the next few months or invest in a real car that will last the next 15 years or so.
The idea here is to make sure any debt you take on will truly benefit you in the long run. You can buy a $2000 Macbook Pro even if you don’t fully have the money for it, so long as you take care of it and make it last the next 5 years. This is a much better plan that buying a $1000 PC that tends to last a year or two before they die (just personal experience).
Or making the switch from renting to owning your home. Yea, owning a home adds an enormous amount of debt to your name, but you are better off putting your money into an asset that you will one day own instead of paying rent to someone else, making them rich.
14. Do things that don’t cost money
One of my favorite things to do is to do stuff that costs little to no money. I like hanging out at peoples houses and just chatting with a few drinks. Or playing board games, or watch Netflix. I like to go for walks and read as well. These things are awesome because they give me a lot of enjoyment and don’t suck my money.
I also love traveling and buying new gadgets. But I refrain from going overboard and only do it once and awhile. Until I get super rich, this won’t change. Because I will easily fall into debt if I do. Have this way of living for yourself too. Try and spend more time doing things that don’t cost money. You may be surprised it’s just as fun as going shopping.
15. You need to learn to say NO
Someone invites you out for drinks and you know you’ll be spending $50 or more? Say NO! Invite them over to your place where drinks are much cheaper. Go to their house. Tell them you’re busy doing something. You get the idea…
Look, it sucks that you won’t have all the luxuries you used to have. I get that. But you need to learn to say no to things that will drain your bank account. Remember, it’s you that said YES to all these things that got you into debt. Living debt free requires discipline, and saying NO when you really want to say YES is necessary.
Debt Free Living Summary
Living debt free isn’t as hard as you may think. Take some of the recommendations above and use it and abuse it. I feel setting a goal and creating a budget is absolutely necessary. Without that, you’ll never know if you are building debt or getting out of debt.
All the other suggestions will help, too. Use as many as you can. If you have A LOT of debt, or want to pay off your debt as fast as possible, the best way to achieve this is to make more money. Getting a side job will help, but a side job will only pay you so much an hour. You truly want to create something that generates more money. A blog is an excellent way to do this, with little money required.