7 Things to Do to Stay Out of Debt
Paid off your credit card debt?
Then staying debt free is a priority.
Find out how with our comprehensive guide.
The joy of seeing your debt fall to almost zero is pretty special.
However, it is the time just before this happens that you must stay the most vigilant.
Unless you want to end up falling into old habits that could land you back in debt, that is!
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Prepare to succeed
Before you hit your goal of clearing your debts entirely, you need to begin planning for this next stage of financial management.
That means thinking carefully about how you will manage the money you have been otherwise using to pay off your debt.
Of course, it can be very easy to feel flush during this time.
After all, you have probably been scrimping and saving wherever you can to get your debt paid off as quickly as possible.
Therefore when you suddenly have a lot more money than you are used to living on, it can be very tempting to blow through it all quickly and live the ‘good life.’
However, what is particularly relevant here is that you plan for the future.
Then you can find a balance between loosening the reins somewhat and making sure that you do not fall back into irresponsible ways of dealing with your money.
For example, factoring in a meal out every few weeks is an excellent way to enjoy your debt-free status, without being irresponsible.
Additionally, you may choose to set aside the value of monthly payment for the first month you are debt-free.
Then you can spend this on a shopping trip, or a vacation celebrating your financial management success.
Although you will need to do this on the proviso that you have a plan, you will stick to in the months after.
When it comes to financial planning, first you must identify what your priorities are.
Consider things such as property.
Do you have a mortgage that that extra money could pay off more quickly, or could you save it each month to cover a deposit on a house?
Also, think about what you and your family will need to be comfortable.
Perhaps the money you are no longer paying into your debts could fund home improvements, better health care, or even life insurance.
Of course, every individual’s needs will be different.
However, when it comes to managing the money that you have previously been using to pay off your debts, preparing to succeed by having a clear plan is essential.
Keep your extra money safe.
Once your credit card balance is approaching zero, you can stay out of debt by opening up a special bank account for the money you would have been paying.
There are several benefits to doing this.
The first is that you can arrange an automatic transfer by direct debit or standing order easily.
Then means the money will be transferred out each month without you having to remember to do it manually.
Secondly, seeing your money accrue can be very satisfying, and help you feel much more in control of your finances.
Something that will only promote even better choices when it comes to spending.
Lastly, having a separate account also allows you enough time and space to carefully think through what you do want to do with that money.
While at the same time keeping it safe and separate to the rest of your funds.
No more impulse spending.
Impulse spending is a thing.
Stores use the psychology of impulse spending to position particular displays.
Also, this psychological trick is present when you are presented with special offers online.
Unfortunately, while our tendency to make snap decisions on purchases is great for businesses, it can be very hazardous to our financial wellbeing.
Of course, when we have more disposable income than we are used to, this issue only tends to be amplified.
For example, when we suddenly no longer have to pay off our credit card debts.
To that end, setting up separate savings accounts, as mentioned above, is the best way to prevent going ‘wild in the aisles.’
Although there are some other things, you can do as well.
One is to cut up your credit cards so you can no longer use them.
Removing your saved payment details for online sites can give you enough time to think through your purchase before you click ‘Buy.’
Finally, why not try the ten-day method, where you can buy anything you genuinely need but have to wait ten days from when you first want it.
The great thing about it is that you will often notice that the purchase was less about the item and more about how you were feeling at the time.
Therefore once the ten days are up, the desire to spend your money on said items dissipates and is much easier to resist.
Balance your new budget.
If you have been diligently paying off your credit card, you have probably developed some excellent budgeting skills.
The good news is that these will come in incredibly handy when dealing with your financial management after your card balance is at zero.
Indeed, it’s pretty vital that you continue to budget carefully, albeit in a slightly less stringent manner.
With that in mind, expanding your budget in areas such as entertainment, clothing, and hobbies can increase your quality of life.
However, because you are still setting a budget, you will be able to avoid unnecessary and irresponsible spending.
Also, because you will continue to monitor your budget, you will be able to keep tabs on things and make adjustments if your spending does start to get out of hand.
In fact, by combining budgeting with saving the majority of your extra money in separate accounts, you can manage your post-credit-card debt finances in the most effective way possible.
Plan for the worst while expecting the best.
Are you wondering where you should invest your extra money first?
The answer is definitely in an emergency budget.
This type of budget is a sum of money that you keep separate from your other finances.
You can then use it to cover the costs of unexpected events or issues.
The benefit of an emergency budget is when something unexpected does occur, you will be able to cover the cost easily.
All without having to go into debt and without any negative impact on your daily budget.
Something you will be very glad of, the next time your vehicle breaks down, or your roof springs a leak!
When it comes to how much you should have in such a budget, a good rule of thumb is that you keep an amount equal to 3-6 months outgoing expenses.
That means your mortgage, or rent, insurances, vehicle payments, fuel, food, and other regular costs you have, such as mobile phone bills.
Remember, the sad truth of the matter is that many people find themselves getting into credit card debt, precisely because they hadn’t planned for such an emergency.
Therefore, by creating an emergency budget, you will put yourself in a robust financial position and minimize the chances of this happening again.
Financial goal setting.
As your credit card balance falls to zero, take a moment to revel in the fact that your income is now entirely yours.
However, after basking in the glory of being debt-free, it’s time to set some financial goals that will help keep you on track over the coming months in years.
When setting financial goals, it is crucial to consider the short, medium, and long term.
In particular short term goals, like saving up for a specific piece of furniture, will help to keep you motivated through the whole process.
Something that means it’s easier and more viable for you to reach your longer-term goals like saving for a new vehicle or paying off the mortgage on your house.
Don’t fall for the siren song of credit.
Once you have got your credit card balance down to zero, you will want to keep it that way.
Unfortunately, the easiest way to get back into debt is to fall into another credit agreement, whether with a card, store credit, or a loan.
To help you avoid this, think of any credit offers like the siren song of mermaids to sailors.
Yes, it sounds very appealing right now, but terrible consequences await if you let it draw you in!
You can become debt free for life!
Do you feel as if you are some distance away from the time when your credit card balance will read zero?
Do you feel like this time may never come?
Well, don’t panic!
Just remember that it can happen for you.
Also, you do not have to walk the path to credit card debt freedom alone.
Our experts are here to offer you free, non-judgmental, and objective advice on how to reduce your credit card debt.
We can even help you reduce the time it takes you to get your balance to zero.
Therefore, if you want to begin your journey to becoming credit-card – debt free and enjoy all the experience discussed above, give our specialist a call on 1-877-879-4770 today.