In a world where most people are forced to live paycheck to paycheck, it’s not surprising that so many people having difficulty staying out of debt. Once in debt, it’s difficult for people to get themselves out of debt. The secret to living a debt-free life is living fiscally responsible, which means living within one’s means.
There’s actually an art to setting up life to be self-sustainable without having to depend on the good graces of lenders. While the borrowing options offered by BlueTrustLoans and similar lenders come in handy when life throws a curveball, the preferred situation is to avoid owing money to anyone. In an attempt to help you learn how to stay out of debt, the following five tips for doing so could be of great value:
1. Don’t Overspend on Housing – Arguably, your housing costs will have the greatest impact on your monthly resources. As a rule of thumb, you should never commit more than 30% of said resources on a mortgage payment or rent. That means you need to be realistic about the space you need, the community you can afford to live in and the amenities you could likely live without if having those amenities would drive your costs above the 30%. Remember, taking on a mortgage require borrowing responsibly, not extending beyond what you can really afford.
2. Learn to be Utility Efficient – Your utility bills (electric, water, cable, phone) can really creep up on you. They also offer the best opportunity for you to control your costs because they are variable costs. Do you really need all those premium cable channels to watch movies you have already seen? Try to do with less. As far as your electric bill, you should turn off everything when you leave the house, open the windows when the weather is cool enough and use electronics with rechargeable batteries instead of staying plugged in.
3. Eat More Meals at Home – There’s nothing wrong with going out to dinner every once in a while. However, it should be considered a form of entertainment instead of a standard way of avoiding time in the kitchen. The costs of eating out are approximately 250% higher than the costs of preparing the same meals at home.
4. No Credit Cards – Credit cards are the debt Devil’s workshop. Even if you have every intention of paying off your credit cards every month, you will still have a tendency to overspend simply because it’s easier to spend money that’s wrapped up in a piece of plastic as opposed to having to hand a cashier green cash. You’ll also be faced with the temptation to let the full payment slide with a minimum payment, which starts the interest meter running and debt accumulating.
5. Prepare a Monthly Budget and Stick to it – The best way to control your spending is to focus on budgeting your income over the entire month. Put the budget on paper. If you are realistic about both your income and expenses, you’ll know whether or not you are living within your means. Your budget should include some savings and money set aside for emergencies (car, medical).
Everyone has a different standard of living. A person’s standard of living should not include the debt they are willing to accumulate in order to live beyond one’s means. It’s important to remember that once you get into debt, it’s infinitely harder to get out of debt. The only acceptable debt (home, card) is debt you can afford as long as everything else you do is payable in cash.