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8 Practical Ways to Keep Yourself Out of Debt

August 6th, 2018 · No Comments · Debt Management

by Kristy Welsh

(Last Updated On: August 6, 2018)

Debt is easy to get into and can be extremely difficult to get out of. Whether you have recently managed to pull yourself out of debt or are new to the wonderful world of budgeting and financial planning, here are several ways you can prevent getting into the debt trap:

Avoid Using Credit Cards

Owning credit cards is a blessing and a curse. On the blessing side, they are meant to give you instant access to money when you need it for big purchases or emergencies, and credit cards can help you build credit.  On the curse side, they can also be tempting to use for small everyday purchases and can rapidly add to your debt load.  In addition, you can hurt your credit by racking up large balances on your credit cards.

Credit is not free and should only be used when you absolutely need it. In order to avoid temptation and keep yourself from piling up debt, leave your credit cards at home when you are out and about during the day. If a situation arises where you think you need to use your card, you will be forced to go home and get the card, which may make you think twice before making the purchase.

If you are not able to pay off your balance each month, to keep your balances from growing, you need to make more than the minimum payment.  Studies have shown that for optimum credit scores, you need to keep your balance below 30% and preferably under 10%.  In addition, carrying a balance means that you are paying interest on your credit card debt, which is literally throwing your money away.  The money you pay in interest could go towards paying down other debt or go into savings.

Pay for College as You Go

Despite the high cost of college tuition, having a college degree is still an advantage in the working world.  Going to college is an important milestone in life that can open up career pathways and more earnings potential, but it can also leave you paying off a mountain of debt if you do not plan accordingly. Americans owe close to 1.5 trillion dollars in student loan debt.  The average student loan borrowers has $37,172 in student loans when they graduate, a $20,000 increase from 13 years ago.

How to avoid debt while you’re getting your education?  Student loans are much too easy to get, as credit requirements are often waived during the loan process.  Instead piling up student loan debt as convenient way to pay for college, look at other options you may have available:

  • Apply for as many college scholarships and grants as you can before heading off to college. There are many grants available for a variety of life circumstances; doing a little research can turn up hidden pots of money.
  • Instead of attending four years at a university, save money by attending community college first and then transferring credits over to a four year college. If I had to do it all over again, I would definitely have gone to a community college first before completing my degree at ASU.
  • Save up the money you need to pay tuition before you go to school. Delaying college is not necessarily a bad thing.  Some colleges are looking for students with practical life experiences in their college application process.  Many colleges are willing to accept a student who wishes to have a “gap year” in between high school and college.  This could be a prime way to get a job and earn the cash for tuition and expenses before entering school.
  • Get a job to earn tuition money while you are attending. I worked the entire time I was in college, and while it took me an extra 2 years to get my degree, I graduated with minimal student loan debt that I was able to pay off in 3 years.

The 30-Day Rule

Too often people make impulse purchases.  Indeed, merchants spend a lot of time, money and effort placing tempting “good deal” items at the right places their stores that trigger the desire to spend money on items they did not intend to buy when they entered the store.  Costco places a wide variety of items at the building entrance, which may or may not be the best deal for you.

I have what I call the 30-day rule when it comes to buying things.  Mastering the 30-day rule is a personal challenge in self-discipline that will save you lots of money and keep you from piling up debt. The 30-day rule simply means that if you find something you really want, wait 30 days before making the purchase. Oftentimes people will forget or change their mind if they do not make the purchase immediately. You will probably find that many items are not as interesting to you after time has passed. Before you make any non-essential purchase, wait for 30 days to see if you still want the item.

When I shop online at Amazon, I often leave items in my “wish list” or even in my shopping cart for an extended period of time before I buy.  I find many times that my desire to purchase the item was fleeting and I can just delete the items from my shopping cart with no pangs of remorse.

Complete a Spending Fast

A spending fast works much like a food fast you may complete for a diet plan or religious purposes. A spending fast is where you select a set amount of time and refrain from spending any money during that time period. You can complete a spending fast as often as you would like and can put all of the money you saved into a savings account. The more spending fasts you complete each month, the more money you can tuck away for emergencies or to pay down debt.

A good way to set yourself up for this is to anticipate your spending necessities like food, utilities, insurance, rent and car payments at the beginning of the month, then refrain from spending any more money for a week, as your expenses will already have been paid for this time period.   If you successful resist the urge to spend, try and put an amount equal to approximately what you would have spent towards other debt or savings.

Make Spare Money in Your Spare Time

Instead of spending idle time reading old magazines, watching TV, or shopping, use your spare time making some spare money to save or indulge on the things you really want. You can take surveys and work on small tasks with a smartphone, create crafts to sell, or provide a service like mowing lawns or dog walking. Another good way to earn money is to write content for the internet.  Websites are always hungry for new content and you can sell your writing to blogs and article “farms” to earn a little extra money.

The money earned from these odd jobs can be used for fun activities so you are not dipping into your general fund or credit cards while indulging. Building savings to provide that little extra financial cushion is also a great benefit to moonlighting.  You just may find a passion for being an entrepreneur and start the next great business.

Avoid Loans

In my experience as a credit counselor, it seems like people want to fix their credit in order to get into more debt. The two most often cited reasons that I heard in my credit counseling days: the desire to purchase a car or a home.  Yes, they’re necessities of life and most people need a car, unless you’re living in a city with excellent public transportation, but buying a new car or leasing is not a good idea – ever.  You can get a newer car for a fraction of the cost of a brand new car without suffering the drawback of the instant depreciation that occurs when you drive a new car off the lot.   Even buying a home, which is considered an investment, can be a bad idea.  Home prices are approaching an all time high and making a purchase right now may not be the best course of action.

Try to avoid getting a loan for anything. You can save up for a new car, college, and home remodels. Loans are borrowed money that must be paid back, and you will almost always pay interest on money that you borrow. While it may not always be possible to avoid getting a loan, always consider other options before signing the contract.

Build a Solid Savings Account

Emergency expenses can take a bite out of anyone’s budget. Even if your car is running like a clock, if you need new tires, a new set can set you back hundreds of dollars. Many people, when faced with unexpected car repairs or medical expenses, opt to charge away on their credit cards, or worse yet, get a payday loan. Payday loans can charge interest rates over 100%, and severely cripple your ability to get out of a financial hole.

Building an emergency savings account is key for staying out of debt. An emergency savings account will ensure that you have money available to cover life’s unexpected expenses. While it may not be possible for you to save a large reserve of cash quickly, you should make it a point to at least save small amounts of money each time you get paid. Even if you can only afford to put $5 or $10 a week into your savings account, your savings account will grow over time.

Always Look For Discounts

The literature on the subject of budgeting fills library shelves, and while I’m not going to go into everything you need to become a budgeting and money savings champion, here are a few tips:

  • To maximize your savings on goods and services you purchase, always look for coupons, sales, and discounts before buying. It always pays to be a money conscious consumer, and the money you save on things you are going to purchase anyway will help you to be able to tuck money away for a rainy day or pay down existing debt.
  • Before signing up for cable, internet, or other services, be sure to ask about promotional deals for becoming a new customer. If you’re an existing customer, it might be worth a call to cancel these services to see what kind of deal you may get for continuing to be a valued customer.
  • Look for coupons before you head out to the grocery store, and always purchase everyday items when they are on sale.
  • If you are one of the millions of Amazon users, look to see if you can get items that are used instead of new, especially hard back books.

In Summary

Use these simple techniques to keep your financial portfolio clear of unnecessary debt. Getting into debt can be stressful and could actually have negative impacts on your health, well-being, and family life. Debt is very expensive: if you carry a credit card balance for months or years, you can wind up paying more in interest than the original charge for the item.  If you’re already living paycheck to paycheck, your ability to get ahead financially is going to be hindered by large amounts of debt.  For instance: if you are trying to buy a home, having too much debt can cause you to be disqualified from obtaining a mortgage.  By doing some careful planning now, you can avoid paying more money needlessly on burdensome debt and will have a financial cushion available when you need it in the future.


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