Many of us wrong believe that it is impossible today to live a debt free life. In fact, it has probably never been easier! If you want to know how to live a life of debt free living, then all you need to do is use the following 5 steps to debt free living a guideline:
It may sound crazy, but you’ll never have a life of debt free living if you don’t put money away each month for a rainy day or to save up for that something special you want to buy yourself. Saving is critical and, unfortunately, many of us have forgotten how to do it! Ideally you should be saving up to 30 per cent of your monthly income in cash, retirement and other savings plans. Moreover, before you can even consider yourself financially ‘secure’, you should have at least 90 days reserve in your savings account. What this means is that you should be able to cover all your bills for the next 90 days from the money you have in your current account.
Before you can consider a life of debt free living you need to know where you are spending your money. It is extremely important then that you have, at minimum, a monthly budget of your income and expenses. If possible, you should also have a 3 month, 6 month and 1 year budget.
Buy used not new
Although it is very tempting to always want to buy new items – such as a new car or new household item – in many cases a secondhand item would do the job just as well. So, if you are serious about wanting to live a life of debt free living, don’t buy a new car with a car loan, use your savings to buy a good secondhand car!
Pay your credit cards in full
The interest rate and fees associated with credit cards can be one of the biggest wastes of your money you’ll be paying. This is not to say, however, that credit cards cannot be good financial tools – if used properly. By paying off your credit card bill in full each month, you can use a credit card to help you save money.
Earn a little extra
There are lots of different ways you can earn a little extra each month. One classic way is to get a part-time job that brings in a little extra cash each month that you can then use to put in your savings account. However, you can also save by investing in tax-free investments, or better still tax deductible investments. The tax you save you can then re-invest.
Not a Guaranteed Debt Free Live But Moving Closer
Not all of these will guarantee you a life of debt free living. Saving and being financially mature takes discipline and it is that above all that you’ll need to have. However, if you follow these simple guidelines, you should be on your way to a life of debt free living!