Top 5 Tips to Live a Debt-Free Life

Living a debt-free life would mean not having those sleepless nights and anxiety brought about by the incapacity to pay a borrowed money. For whatever reasons there could be in incurring such debt, no one certainly wanted to fall in a debt trap.

debt-free

There are a lot of reasons why people get into debt and most of these are very personal. These are driven by unprecedented circumstances that people encounter in their everyday living. Most importantly, if you don’t have any financial safety net, it would only take one unfortunate event to happen to get into a debt trap.

In here, we will give you some of the best tips to live a debt-free life. You shouldn’t be spending the money that hasn’t arrived yet.

1)      Save.

A lot of people underestimate the value of saving by stressing that money is supposed to be spent and not be kept. But this is the very mentality of those who are living under the debt portfolio. Your savings can save you from emergencies in the future. No man in this world is certain enough to say that they will never encounter any problem. Even some insurance companies don’t give cash guarantees if ever they get bankrupt. So you have to understand that there’s an exclusive value to saving. It’s a resort that you’re left with when all the other financial schemes collapse.

In saving, you’re building your financial safety net. It’s an emergency fund that won’t leave you nothing when faced with unexpected expenses like sudden death of a family member or payment of hospital bills. It feels good to live within your means but it doesn’t help you establish a certain future. Saving is the answer to be freed from debts.

If you have a good cash inflow, there’s a great opportunity to save. But if your income is just enough to provide for your necessities, leave at least 10% of your income for savings and then spend the rest for the necessities. Always allocate funds for savings.

2)      Use cash in spending.

Considering the different forms of deterrence to spending, you have to account the factors that drive your spending tendencies. We all spend money. But spending for necessities is different from overspending to beyond the needs. This is where you have to double-think.

Using cash in spending is told to give a subconscious deterrence to a spender because humans have this natural anxiety from the feeling of having an empty wallet. On the other hand, when you use credit card, you can think about buying things for whims under the thought that everything is going to be charged under your credit. People love to pay for luxuries when they’re not seeing the cash flowing from their wallets. It’s a virtual money borrowed from the bank that will be deducted from your fixed salary. Since you don’t want to be debt-loaded simply for buying expensive bags and shoes, don’t use credit card. Use hard cash.

3)      Itemize a budget plan.

When you don’t have a budget, you’re simply thinking that any money beyond your income can go to any kind of expense. But when you have a budget, you have a ceiling amount of expenses for your needs without going overboard.

Don’t be disappointed if you are unable to follow your budget estimates.  This is a standard to how much you’re deviating from the original plan and thus will remind you how much you will be needing to compensate for the loss in order to be back on track. This visual representation of your expenses can guide you in establishing your financial plans and thus allow you to be free from debt.

One of the major problems that cause debt is overspending. And you have to acknowledge the fact that it’s also one of the most preventable ones. When you don’t overspend, you give yourself a chance to breathe from the financial pace. You have better opportunities to invest on other things because of an efficient financial management.

4)      Separate your savings from personal funds.

Don’t mix up your savings and personal funds. If you have access to your savings fund, you might even just get lured to buying a fancy jacket and charging it to your savings. Your savings fund must be resolutely immune from luxury expenses. It’s supposed to be a last resort and should only be used in the most desperate circumstances.

If you’re able to overcome such kind of tendency, then you have a clearer path to being debt-free. That would mean that you’re focused on achieving your goals and your expenses don’t go beyond what you’re earning.

5)       Learn.

If possible, read books about financial management. Learn them by heart and apply them. There are so many benefits when you have a grasp of financial literacy. You give yourself freedom to be scammed by con-artists who entices you to invest into a non-existent business. You also give yourself more chances to know how to grow your money with trusted institutions. If you know how the money operates, then you can even have the money work for you.

These are our major tips so that you can live a debt-free life. Remember that freedom from debt is not a luxury of the rich. It’s a choice that everyone can afford if they only work enough to be freed from such burden. Debts are evil traps. It cripples your ability to move forward because you’re spending the money that is yet to come. Lead a debt-free life and pave the way to be successful.

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