Staying out of debt requires discipline, budget planning and some sacrifices. Beginning with small goals and continuing with new habits will eventually lead to being debt free.
1. Keep Track of Expenses with Budgeting and Expense Tracking Software
Keep track of monthly expenses. There are plenty of computer software programs for tracking expenses that will help with this. Some of these budgeting and expense tracking software programs include Quicken, Account Xpress and Budget Express.
Budgeting software will help clarify where the money's going and where to cut back in the budget. It's possible to track expenses without software, so don't let that be a deterrent. A pen and pencil will do in a pinch as long as personal expenses are tracked.
Don't forget to include extra expenses that crop up unexpectedly like house repairs and dentist appointments. Calculate these in the budget separately, and prepare by saving an emergency fund for the year.
2. Change Lifestyle to Reduce Expenses
If income coming in is actually less than what’s going out, it’s time to consider changing lifestyles and get rid of expenses that are contributing to the debt. Reducing expenses will mean different things to different people because everyone has different priorities. It might mean going with one less car and taking public transportation or it might mean giving up that second cocktail after work.
3. Clarify Needs and Wants to Avoid Going Into Debt
That cute designer purse may seem urgent, but it’s not worth it if it means going into debt or paying the phone bill late. Make sure the basics are covered in the budget before buying anything on impulse. Knowing the difference between needs and wants helps avoid worrying about bill collectors or how to explain why bills are late.
4. Cut Down on Take-out and Avoid Impulse Buys
Cut down on take-out and cook homemade meals. If time is a concern, prepare some of the meals ahead of time and freeze them so they just need to be heated in the microwave.
Some cookbooks specialize in freezer meals or quick recipes for busy people on the run. Slow cookers are also handy because stews, roasts, soups and sauces can be made in the morning and will be ready by suppertime.
Have quick snacks handy when rushing around like muffins, apples or granola bars. This helps avoid impulse fast food like burgers, donuts or fries.
5. Make a Grocery Budget and Stick to It
Sticking to the food budget is easier when every item is written down with prices included. If prices aren’t known, make a rough estimate and correct it the next time. Make sure to eat before grocery shopping in order to stay alert, stick to the budget and cut down on impulse buys.
6. Beware of Credit Card Debt Problems
Keep one credit card for emergencies and/or for building credit purposes if things aren’t out of control. Otherwise, pay in cash and get rid of all cards until payments are caught up.
Credit cards are too tempting to use when finances are tight and only add to the debt problem. If there are several credit card debts to pay, seek credit counseling. Sometimes, counseling centers offer free debt counseling and they will help set up affordable payments.
Once debts are finally paid off, it might be tempting to go back to the same lifestyle. Unless there is more money coming in, this will only lead to more debt. Try some of these debt reducing ideas and they might become long term habits that help save money.
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