In a world with increasing living expenses and stagnant paychecks, it is tempting to take out that loan or pull your credit card out to cover living expenses. The problem is, small debts can add up over time until they become big debts that are much harder to manage. Here are some tips on how to stay out of debt by managing your money wisely.
Sticking to your budget is the foundation for all your other efforts in staying out of debt.
5 Tips on How to Stay Out of Debt
- Set up a budget. Budgets don’t have to be complicated. Many of your expenses are fixed. You know how much money you make. You know how much your rent/mortgage payment is. You know what your car payment is. After subtracting fixed expenses like these from your monthly pay, you can figure out ways to save money in areas such as groceries, entertainment, or clothing expenses.
- Get a roommate. If your home is taking up 50% or more of your paycheck, you are spending too much on it. Using that extra bedroom as an office may be nice, but having someone to share the burden of paying for the entire home is far better than losing it to foreclosure or missing rent payments.
- Learn to cook. Cooking for yourself is far less expensive than eating out. Most meals cooked at home cost less than $5.00 per plate. With many restaurant meals starting at $11.00 per plate, cooking for yourself offers significant savings. If you were eating out for three meals per week, eating at home will save you $72.00 or more per month. That money could go towards your student loans or your mortgage. These days there are so many cooking shows on TV and online that you can learn to make appealing meals that fit your taste, your budget, and your schedule.
- Ditch your car. For people living in urban areas with extensive public transportation available, you may find that getting rid of your car isn’t so hard. You will cut the car payment, insurance premiums, repair bills, parking fees, and gasoline costs. Yes, public transit costs money, but when you add up all of the costs of your car, it could mean substantial savings for people who stick close to home. For those occasional trips when you need your own car, a rental can do the trick. If you can’t go without a car, keep it reasonable. Look for a reliable rather than a flashy ride. Brand new cars incur higher insurance premiums. Consider a lightly used car with a reputation for reliability and good gas mileage.
- Shop only when you need to. For some people, shopping is a pastime. Going from store to store and finding the latest and greatest fashion accessory or gadget is downright exhilarating. Unfortunately it is also downright expensive. When you already face a mountain of debt from student loans, carefully consider whether or not you really need that item in the store.
As the folks over at Quicken have said, “A budget isn’t constricting. It sets you free. When you have a plan, know how much money you have and where it’s going, you don’t have to worry about it. Knowledge really is power.”
Learning how to stay out of debt is the first step to better money management. Just take the time to plan ahead, and carefully consider where you spend your money. You work hard for your income, take care with how you spend it.