Presently, millions of Americans do not know how to live debt-free.
As young adults, they start with taking out student loans for their college education, often for a profession that does not pay that much.
Then they add on several credit cards and end up with thousands of dollars in debt by the time they graduate. Once they join the work force, they first take on car loans and then mortgages, until debt payments just become a way of life.
At the end of 2020, the total consumer debt in the US stood at $14.56 trillion, with an average American carrying $140,420 of personal debt.
Ever stop and reflect on how to extricate yourself out of this quagmire of debt, but wonder how to take the first step? Following these six sensible habits can help you work toward your goal to be debt-free.
Write a budget and stick to it
The very first step in your quest to be debt-free is writing a budget. A written budget creates a clearer picture in your mind and throws up ways to find spare money that you may not realize you have otherwise.
Sticking to a written budget may be more difficult than just putting it down on paper, but putting it down on paper is a necessary first step.
Cultivate the habit of saving
Now is always the best time to start thinking about your retirement goals and working towards them with a clear plan. It is entirely possible to pay off debts and start keeping some money aside for your retirement too.
Using your budget, rationalize expenses and start saving every month into a savings fund to avoid falling farther into debt.
Limit eating out
Eating out can be expensive. When you go out to eat in a restaurant you are not just paying for the food but also the service and ambiance.
It does seem convenient when someone else prepares and serves you food, but it also adds up to a lot of money at the end of the month. Make a meal plan, cut out impulse purchases at the grocery store and start cooking at home.
Learn to say ‘no’
Evenings out with friends, vacations in the summer, new clothes, and the latest gadgets. There are temptations galore, but one habit that will keep you debt-free is saying “no” to splurges.
Cook dinner at home with friends, make your clothes and gadgets last longer and look for free activities in your vicinity that you enjoy. To be debt-free, you will need to prioritize what you need to do and start saying no to the rest.
Learn to be patient
Omnipresent social media throws up images and anecdotes of people vacationing, eating out, and buying new things. It can be hard to ignore.
Debt-free people operate with their blinkers on and stay focused on their long-term goals. Be patient, do not let the comparisons creep in, and keep in mind that your time to do all these things will arrive for you — once you pay off your debt.
Take time to assess
Continually evaluate your financial conduct on parameters of both your short-term and long-term financial goals. Discard bad practices and change the plans that are not turning out as you had thought they would.
Do not keep repeating something if it is not leading to the desired, or expected, outcome. A regular appraisal will increase the chances of success if you change your course of action suitably.