How many of you can, with a clear conscious, say you’re debt-free? Not many, I bet. Mortgages, student loans, credit cards and car loans are just a few of the many ways you can live outside your means. Add to that the endless upgrades pushed on you for your cable and phone plans and you may well be scrambling to live the best version of your life.
- Don’t spend more than you have in your bank account. I know this may seem obvious, but many people fall into the trap of using their credit card to make up the difference only to then be burdened with an ever-increasing balance.
- Put away 10% of your earnings every month. When The Wealthy Barber by David Chilton first came out, I was in my early 20s and thought it sounded like a good idea, but was too busy living my life to give it much thought. I completely understand and appreciate the concept now. Once I did the 52-week money challenge (I got to 26-weeks), I started to put away 10% of my income every month. Some months that savings gets spent, but each month there’s a little bit more left over than the previous month.
- Use credit cards to take advantage of their rewards. Be sure to get a card with a low interest rate. If you don’t trust yourself to pay off the balance every month, consider getting a prepaid or secured credit card. I use a prepaid credit card and, although I’m not yet rebuilding my credit rating, I do get the convenience of having a credit card without the anxiety of not making the payments. If I rent a car, I know it’s already paid for.
- Budget, budget, budget. Many people live paycheck to paycheck. Every three months, I write down all my expenses and all my income for the following 3-months. I like to see my budget on paper so I can make any necessary adjustments in advance instead of scrambling at the time.
- Be creative. Being debt-free doesn’t have to be boring. Live within your means and budget for the things you love. Would you rather have a trip paid for before you go or spend 6-months after you return paying it off?
- Watch how and where you spend your money. Grocery shopping with $100 gets you different quality and quantity depending on where you shop; think No Frills vs. Donald’s Market. Be a smart consumer and shop around. Wait for sales of your favourite or most-used items. I found this last tip quite time consuming as I researched which stores sell what, when they had sales and when quantity was more important than quality.
Although it’s still a lot of work to stay happily within my means, I’m finding it well worth the effort. Being debt-free feels great.