Debt is a part of life, and helps the economy move. If there was no money to be loaned, many companies would have a hard time doing business.
That being said, I would prefer to have no debt in my life. Wouldn’t you? The idea of being free and clear of debt is a good thing, and it sounds very appealing. By the way, by this I mean clear of any and all debt, including mortgage debt. Most of us aren’t there yet, and most Americans probably never get there.
Well, if we want to be debt-free, we have to work at it, much like anything else.
Along those lines, I’ve come up with 6 tips to help people become debt-free:
- Stay healthy. Surprised to see this as the first one mentioned? Well, many people who end up getting serious health problems are at risk for financial ruin. The costs of healthcare as people get older can be very high. Keeping healthy is one not so obvious, but basic way to help prevent us from getting into debt. After all, if we’re not healthy enough to work, how are we going to pay bills (unless savings are massive).
- Be properly insured. Medical costs can be staggering, as alluded to above. Best to do what you can to make sure expenses don’t sprial out of control, which they very well could do so quickly in the absence of insurance.
- Protect and grow cash flow. Going into debt isn’t just something that happens in the event of wild, uncontrollable spending or health crises. Rather, it can still happen if you’re spending a reasonable amount of money. If you don’t have enough cash flow to offset expenses, the deficit can grow into credit card debt. Keep your career or business going, or if you’re really fortunate make sure your nest egg is throwing off enough cash flow 🙂
- Differentiate wants and needs. Sure, you might want that newer, 4 bedroom and 2.5 bath house featuring a beautiful kitchen with granite countertops. But do you need it? Why not just go for the 20-year-old 3 bedroom and 2 bath house with a smaller kitchen, which costs $125,000 less and you can comfortably afford?
- Pay credit card bills in full right away. By right away, I mean before the due date and before late fees or interest charges are incurred. If a purchase is charged, make sure it can be paid for once the bill comes. Don’t buy it unless it’s an emergency or unavoidable. While you’re at it, keep up to date on your credit by getting free credit scores in order to be informed.
- Make savings automatic. Don’t give yourself the opportunity to get tempted to spend money unnecessarily. Save automatically, and save a sizeable percentage of your income while you’re at it! Also, don’t forget your emergency fund.
My Questions for You
What do you think of these 6 tips on how to become debt-free?
Do any of these surprise you?
Which do you utilize? Do you have any other tips?