How to Get Debt Free and Stay Debt Free

Make sure that money is working for you, not against you.

by Spero Financial

For most Americans, the process of becoming debt free is not easy. Almost 40 percent of people live with credit card debt, and on average, they have more than $16,000 racked up on those cards. So once you’ve been able to get out of debt, it’s important not to fall back into the old habit of overspending again.

The great part of being debt free is that now you have options — options that may not have been there when you were saddled with debt. So we’ve compiled a guide on how to stay debt free once you’ve gotten there.

Avoid temptation to spend again

This one is hard, because temptation is everywhere. From extra discounts, new credit card offers, not to mention the day-to-day marketing of sales, specials and combos on all your favorite products and services makes it difficult not to go in debt again.  However, there are a few steps you can take to help keep you on track.

First, get rid of what credit cards you have. If you don’t want to cut them up and close the account (which can sometimes have negative effects on your credit score) then put them in a safe deposit box, or freeze them in a bowl of ice in the freezer. Whatever you do, make them inaccessible for impulse purchases — usually once you have time to think that purchase through, you’ll realize you don’t really need it.

In place of the credit cards, go to a debit card or cash-only system, so it’s easy to spend only what you have. Make sure your budget allows you money for what you need and some of what you want so you don’t feel restricted. And finally, opt out of as much junk mail as possible so those “special offers” don’t end up in your hands with the daily mail.

Reset your mentality and focus on the positive

While doing all this may make you feel deprived, consciously focus on what matters. You are out of debt, and because of that, you have a world of options available to you. It may take a conscious effort to leave that new movie at the store, but if it means you have more to spend with friends or in savings, isn’t that a win? Make sure you stay focused on the positive angles of your debt-free lifestyle, so that you are constantly motivated to stay that way.

Plan for the future

What do you want your future to look like? Do you want to travel more? Is your retirement plan in place? And how are your short-term savings?

Once you have a bit of money freed up, you’ll want to focus on two things immediately: saving more and upping your insurance.

According to GoBankingRates survey in 2017, most Americans have less than $1,000 in savings — barely enough to cover a medical visit or an insurance deductible if your car were in an accident. That said, start working on your emergency savings; it should have enough money to cover you for about three to six months, in case of a major incident. At the same time, re-evaluate your insurance options, and make sure you are covered well for the things you own so that future incidents aren’t crippling events.

Give more

Most people want to give more to others, but their own debt makes it difficult to justify. Now that you are debt free, you have the ability to make choices on who you want to give to, how much, and when. Start by choosing a few things you are passionate about, or a few organizations you are already connected to, and get to know them. Additionally, make sure you keep track of any and all charitable donations — they will come in handy at tax time when you need an extra deduction.

Follow your passions

This is the fun part — where you have money that you can use to truly experience life and explore your passions.  Do you love to scuba dive? Have you always wanted to go to Bali? Go through the items on your bucket list (or build a list if you don’t have one!) and start picking which ones you’ll tackle first! Remember, though: your goal is to stay debt free, so make sure you aren’t adding things in that you can’t afford. If you need to start a special savings account just for a venture on your list, do that. In any case, follow your passions, and have fun doing it. You’ve earned it!

This material is for educational purposes only and is not intended to provide specific advice or recommendations for any individual.

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