To stay debt-free, you must live within your means. Once you start living debt-free, you’ll open doors to a life you never thought possible.
A debt-free life is a choice. When you have the courage and the wherewithal to deny all debt and to stick to your guns, you’ll feel free. A debt-free life is also the exception, so don’t feel like you’re ruining your life if you end up with student loans, credit cards, and car loans.
To live a debt-free life, you must consider how much money you make. Compare your living expenses to your income. It’s essential to spend less than you make; otherwise, you will fall back into debt.
Consider what you want your future to look like and set realistic goals to reach your money goals. Commit to the future you want and keep your expectations low so you don’t get too discouraged and quit.
Here are some of the perks you get in life from living a debt-free life:
Consider having a side hustle or lessening your school hours to work full time. If you aren’t making an income, it can be hard to shy away from debt. And if you are living above your means, that extra money has to come from somewhere. So picking up extra shifts or creating a side hustle may be your best bet to live a debt-free life.
If you want a vacation, plan for it ahead of time. Make sure you prepare funds ahead of time versus grabbing a new travel rewards credit card for your entire trip. This can take more time, meaning your vacation may take an additional year (or more) to fund.
The biggest challenge to living a debt-free life is the lack of credit you would be building. You won’t have a credit history at all without taking on debt.
And it’s not just a lack of credit history will be a challenge when opting for a debt-free life. You also are saying no to car loans. This means you will need the funds to purchase your car in full. This is more than feasible if you are okay with settling on an older car, a damaged car, or a car with more miles.
Car accidents happen. If you are determined to live debt-free, it’s important that you also create a safety net. Get covered better with your insurance and make sure you are funding a savings account designed for car repairs and maintenance.
You may be happy with renting for the rest of your life, but living debt-free may end with purchasing your first home. It would take decades to save up for most homes. To qualify for a home without any credit score, you’d be put on an alternative path, slimming down your lender pool. Your debt-to-income ratio should be less than 43% to qualify for a mortgage, you should have money saved and be able to prove job stability.
Maintaining a debt-free life can be a challenge. You’ll be asked at the store and over the phone if you want to sign up for a company card to save on your big purchase. It can be hard to say no to that 10% off.
It takes consistency, hard work, and a sharpened ability to deny your impulses. If you’re someone who has just paid off their student loans and their credit cards, good for you. You may only ever have a mortgage to pay from now on. In that case, you can kind of consider yourself debt-free.
Some characteristics of people who live debt-free are:
Take control of your spending and try to limit it if you can. For instance, you may not need to pay $140 a month for your phone bill when there’s other companies that cost $90 every 3 months. This goes with your transportation. If you and your coworker live in the same neighbourhood, why not carpool and split the bill on gas? Could you share their internet, or cook for each other? There are many ways to get a lower monthly payment on every expense. Even groceries! You may be shopping at a more expensive store when you could have them delivered at half the price.
It takes some more time, but if you look at your expenses and compare them across the board, you can see where you can save. And if you can save, you can spend less. If you spend less, you have more. This will help keep you from going astray.
As we mentioned above, having multiple income streams will cushion you and help you maintain a debt-free life.
Once you have narrowed down all of your expenses after handling your debt, you can create a budget. Then, budget for everything and even begin investing.
Chayla Soden is a high-level content marketing writer located in the United States. She has a BA in English and has been writing for many years