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Paying off debt isn’t easy, and it takes time. In addition, the thought of getting out of debt can become more daunting the longer your debt lingers.
As I’ve gotten older and gone through the financial highs and lows of life, my perspective on debt has changed. I’ve learned a lot about what it means to live debt free, and I know from experience that there are things you can do to get out—and stay out—of debt.
1. Change your perspective. I believe there is no such thing as good debt. I am not saying that all debt is bad, but having outstanding debt of any kind adds significant risk to your financial health.
Buying a house, paying for an education, or starting a business are a few examples of debt that can be worth taking on—and paying off. Unpaid bills and high credit card balances, on the other hand, can be very harmful to your financial well-being. These types of debt don’t pay off down the line and aren’t worth having. Over the long term, it’s safer to have no outstanding debt.
2. Pay yourself first. Before you pay any bills or spend any money, you should pay yourself. The car that sits out in your driveway, that new pair of shoes you just bought, that big screen TV hanging in the family room—these things could not care less if you lose your job or have an unexpected emergency.
It’s not a matter of if, it is a matter of when you’ll face unexpected expenses. If you haven’t been paying yourself (putting money into your savings), then you will have no choice but to rely on credit cards to get through your financial predicament.
3. Conduct a periodic spending checkup. If you can spend less money than you earn each week, chances are you can live debt free. If you’re having a difficult time making ends meet, try tracking all of your spending for two weeks to see exactly where your money is going. Then, see where you may be able to cut back.
Once your finances are under control, it is still a great idea to periodically track your spending. Just like diet and exercise, after a period of time most people become complacent and fall back into bad habits with their spending.
Just as you go to the doctor or dentist for a periodic checkup, it’s important to do the same for your spending. Start paying yourself, if you haven’t already, and assess what’s most important to you—living debt free or, for example, having a designer wardrobe. I bet you’ll find that enjoying a debt-free life later is worth making some small sacrifices now.
Steve Repak, CFP®, is the author of Dollars & Uncommon Sense: Basic Training for Your Money.
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