Keeping The Debt Hounds At Bay


Maybe you’re a new graduate embarking on your first full-time job. Or, after much effort, you’ve managed to pay off all your credit card charges. Or you’ve just gotten a big raise, so that your income comfortably exceeds your expenses.

Isn’t it great not having to worry either about having to pay interest or whether you’ll have the money to meet next month’s bills? If you want to keep yourself in your happy state, follow these tips for staying debt-free:

Track where the money is going

You can’t possibly know how much money you need every month unless you know where your spending is going. So write down in specific categories where every cent goes for the next month or two.

For example, you might put meals you cook at home under “Groceries” while meals out go into “Entertainment.” You may discover that you’re spending too much for a certain category, such as partying at bars, which doesn’t leave you enough cash for doing what you truly want to do, such as travel to France.

Avoid the temptation of going into debt to get something that catches your eye. Instead, adjust your spending so you can move money from one budget category to the next.

Pay cash for everything

You can use your credit card to manage your money effectively. But unless you know how to so, you’ll end up spending more than you want to.

Put these small pieces of plastic in a drawer or cut them up entirely. Then, pay cash for everything. It’s easy enough to avoid spending for something you can’t afford if you don’t have the bills in your wallet to pay for it.

If something that you want is more expensive than you can pay for all at once, talk with a merchant about putting the item away on layaway, or create some goals as explained next.

Create some goals

One easy way to get into debt is by impulsively buying everything that you set your eyes on. To prevent this from happening, write down the goals you want to achieve and be very specific.

For example, you may want to have $30,000 on hand to buy a car or spend $1000 to buy a new outfit. Then ask yourself whenever you spend money, whether the amount leads you closer or further away from your goals.

Pay yourself first

It may be difficult to save money if you wait to do so after you have taken care of all your expenses. Money always seems to be in short supply at the end of the month.

To put some cash away for long term goals, pay yourself first before spending for any expenses. You can do this easily by transferring a fixed amount to a savings account at the beginning of every pay period.

If this requires too much discipline, approach the human resources person at your job and ask if she can automatically deduct a savings amount from your pay to go into savings. You’ll then never miss the amount because it disappears before you’ve had a chance to see it.

Focus on experiences rather than things

Is it more important to you to own a book or to read what it contains? Do you like sitting in a stadium or watching a baseball game? Do you enjoy owning a specific song or listening to it?

Figure out what you get out of possessing an item and see if you can duplicate the experience at little to no cost. For example, you could borrow a book at the library, watch an amateur or high-school baseball game, or listen to the song on the radio or a free streaming service.

Not only will the experience be enjoyable than the objects but you won’t be cluttering home with too many things that you need to find storage for.