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3 Strategies for Debt-Free Living

The first step toward enjoying life debt-free is to rid yourself of credit card debt. Credit is so easy to obtain that it can quickly overtake you. Pay your bills and live off the leftover cash. Resist the temptation to buy something with a credit card when you don’t have the cash to pay off the credit card that same month, because steep interest on the credit card means you could end up paying twice or more for that item over time. Nothing’s “on sale” when you buy it with a credit card (and don’t pay it off that same month).

Another important strategy is to live within your means. People shrug and say, “I’m just not good with money,” and avoid writing down real figues. Your monthly income is the pie, and each thing you buy takes a slice. Is the expensive restaurant worth so big a slice when a casual eatery will do just as well? Is a designer label worth the insane markup when it will leave so little pie for other things? Keep the real numbers and proportions in mind as you make spending choices—don’t lapse into fuzzy “it’ll just work out somehow” thinking when it comes to your finances. You gain a feeling of control and responsibility living within your means, not to mention less stress and better sleep.

Finally, think of savings as something you buy yourself every month. Whether it’s automatic transfers to a savings account, payroll deductions to a 401(k), or putting cash in an envelope at home, save regularly just like you spend regularly. Your money works for you when you invest it in an interest-earning savings account or an IRA or 401(k).

Track Your Spending

It has never been easier to make ordinary everyday purchases without cash. Fast food joints take credit cards now. You can hold up your phone at a donut shop to charge a $2.50 maple bar. Purchases we would have once been embarrassed to make without cash are commonplace. Cash gradually leaving your wallet was a reality check nobody could ignore. Today, our spending has never been less attached to reality, and we quickly lose sight of how much we spend.

Although cashless living does not give you the solid sense of spending that cash does, all those purchases do show up in black-and-white later. Look at them. Really look at the credit or debit card statements each month and retrace your spending steps via the transaction history. A little here, a little there. See how it all adds up.

If these were your friend’s numbers and he or she wanted advice on how to save money, what might you suggest? You might suggest brewing coffee at home instead of buying it every day, or bringing leftovers for lunch a few times a week instead of eating out. Money-saving tips are contagious and fun—the internet is full of blogs and videos.

Looking over the clear list of expenses each month that you get from using phone wallets and cards is your best way to identify where you can spend less. All the tracking has been done for you.

Remaining Debt-Free After Financial Recovery

One you have achieved freedom from debt, your goal becomes staying free. Keep the two best credit cards, two of the big names from different banks, and close the rest. Designate one card as your backup card, and leave it at home for emergencies. Carry the other one in your wallet to buy things conveniently during the course of the month that you’ll pay fully for when the statement comes. It becomes “plastic cash” and not a credit card anymore. You pay the statement in full every month before any interest accrues, before the credit card company gets a single dollar out of you.

Notice we don’t say, “Destroy your credit cards and just use cash.” That isn’t realistic with cashless transactions catching on at even the smallest shops for the smallest purchases. A card is mandatory for hotels, travel tickets, and car rentals. Nowadays you need one credit card on your person, either actually in a wallet or virtually on a phone. The important shift happens not in your pocket but in your mind: It’s not a credit card anymore but a temporary substitute for cash this month only. You pay off the statement in full every month.

Take Advantage of Automatic Payments & Savings

Managing money is a challenge for many people, and one big reason is timing. If you don’t stay on top of bill payments, interest and penalty fees pile up. When credit card companies started pushing paperless billing a few years ago, they weren’t thinking of the environment, no matter how they tried to spin it. They knew that when customers did not get an actual bill in the mail as a reminder every month, a certain percentage would forget to pay. Hello, $35 late fee!

Take advantage of the automatic payment feature for your power bill, phone bill, and so on. Each becomes one less payment for you to remember every month. All it takes is keeping a comfortable amount in your checking account at all times, a floor that you learn not to dip under. Late fees are a total waste of your hard-earned money.

Set up automatic transfers from your checking account to a savings account so that savings is another thing you don’t have to think about. Savings is like paying your future self. Give those payments to your future self the same priority as bill payments, and set them up for auto-transfer so they are hassle-free. You can adjust the dollar amount anytime.

Professional Money Management Help

Credit card companies often have financial planning departments or partners. Remember, you are the customer of the credit card company. You have given them plenty of money. See what money management services they offer. This is an easy first step if you’re thinking of getting the advice of a professional. Your bank is an excellent next step for professional advice and referrals. Our point is that you don’t need to sift through faceless money manager results in a search engine and worry about who to pick and who might be a scam; rather, you already have a business relationship with your credit card company and bank.

Financial planners help you get a clear picture of your monthly budget as well as help you put into focus your long-term goals and needs. They know how your money can work for you instead of against you, through investments and savings.