It is no secret that leaving our debt will affect our overall well-being. In fact, it is ideal that you do not need to make a certain payment without borrowing money.
That said, the ability to borrow money can help many people achieve their goals, such as buying a home, starting a business, or getting an education. However, if it becomes overwhelming and unmanageable, it can also cause stress.
So let’s talk about how to get away from debt. We hope you can use these tips to help you build a solid financial foundation!
Avoiding debt is a good pursuit
We accept debt as part of our lives, but living with it is a huge source of stress for many people. In fact, the recent Mind Maind Tover Money Survey from CNBC discovered that 45% of Americans are worried about how to manage their debts.
Respondents also stated that tensions in carrying debt affect their work, relationships and physical well-being.
That said, let’s discuss some of the benefits of avoiding debt.
It’s less stressful
Leaving your debt means you are not constantly worried about money. You don’t have to work overtime or do extra work to pay off your debts.
You have the time and energy to enjoy life. Plus, when you’re not borrowing money, you can spend your money without feeling guilty.
You will maintain your income more
If you have debt, a percentage of your income will pay it back. It’s also expensive to have a lot of debt as you pay for interest and fees.
Learning how to stay away from debt will increase your income. You have the money to build an emergency fund, contribute to a retirement fund, or take your dream vacation.
Your credits will improve
Spending money is not about improving your credit score, as it indicates that you can be held responsible for your credit. A high credit score means you can get better interest rates and terms on the loan you apply for.
Plus, great credits make it easier to get approval for your apartment and find a better job. This is usually because landlords and employers review the applicant’s credit report to determine whether it is reliable and responsible.
How to get away from debt
Research and research say avoiding debt is beneficial for your mental and physical well-being and financial health. But knowing is one thing, and it’s difficult to actually do it.
So here we present some important steps that will help you live completely and build wealth without borrowing money.
1. Know your income
The first step to avoiding debt is to know how much you earn. If you are a salary employee, it may be easier to track your income.
If you are a business owner or a freelancer, you need to calculate your earnings per month. Please also add income from other sources.
The benefits to track your income
Knowing the exact amount you bring every month means knowing how much work you have to do. It’s a great starting point to help you create a realistic budget for yourself.
Tracking your income also shows whether you are making enough to cover your expenses. Learning to spend more than you earn can be upset and discouragement.
But knowing is half the battle. This discovery will help you start looking for ways to increase your income and fill the gap. Otherwise, it will be difficult to borrow money to use your credit to achieve your goals.
2. Track the cost
Now that you know how much you earn, the next thing you need to do is monitor your spending. Tracking your expenses shows you what you spend and how much you spend.
Create a list of all fixed costs, including mortgages, rent, utilities, phone bills, car notes and more. Next, check your credit or debit card for expenses such as groceries, subscriptions, clothing, and more and calculate the total.
You can use traditional pens and paper, or spending apps such as Credit Karma’s Money Management Tool and YNab.
Once you understand where your money goes every month, you can cut back on some areas and take steps to instead place your money where you want it.
3. Create a budget
To avoid debt, you need more than tracking your income and expenses. You have to be proactive, so you need a budget.
Budgeting sounds scary to many. Because they think it means they can no longer enjoy life. But the budget plans where your money goes.
What is budgeting and why is it great?
You are responsible for your income. Therefore, you control your money and avoid impulsive spending.
Budgeting helps you become more intentional where you spend. You will determine your priorities and reflect that in your budget.
There are many ways to create a budget. Whether you just hate your budget or don’t earn the same amount each month, there’s a style.
4. Building an emergency fund
An emergency fund is exactly what the name suggests: bank money that can be used in emergencies. A bank survey found that one in four Americans have no emergency savings at all.
Without emergency funds, it is difficult not to spend on credit cards. If something like a loss of work, illness, or a root of the chest occurs, you will have no choice as you will have to rely on trust to correct the situation.
If you haven’t already started an emergency fund, start with a few thousand from a different savings account. Next, go on to save at least 3-6 months’ worth of basic essentials.
This means it’s enough to pay for food, housing, transportation and essential utilities.
5. Plan your meal
Creating a meal plan is another tool you can use to avoid borrowing money. Essentially, plan each meal for the day for a week or month.
The best thing is that you don’t have to think about what to make for dinner every day. It also reduces the likelihood of ordering last-minute food delivery and saves money.
Grocery shopping is easy when you have a meal plan. We’ll create a list of the ingredients you need and do our best to pick only the items that are listed. This will help you avoid impulse purchases.
6. Seek for a salary increase
Learning to seek a salary increase is a skill set that you need to brush up on whether you are starting a new job or in the same position as you have had for years.
Apart from self-esteem boosting, negotiating your salary also ensures you don’t leave money on the table – lifetime revenues in hundreds of thousands of dollars.
When your take-home pay increases, it’s easier to avoid debt. Therefore, assess your workplace duties and liability and seek an increase in wages that have expired.
How to seek increased wages
First, we will investigate salary trends in the industry. Next, create a case. Give me a reason why you deserve a raise.
For example, you can discuss how your skills and experience will benefit your company’s revenue.
Finally, make sure to practice delivery before scheduling a meeting. If possible, ask your mentor or trustworthy colleague to go with you. This will help you feel more prepared and make you confident that you are on your way to the discussion.
7. Starting the side hustle
For many of us, we need to make more money to avoid debt. So, if less spending isn’t helping you, why not start side hustle?
To start side hustle, look back on your passion, interests and skills. Additionally, consider the time you have and the resources you need to start.
For example, if you have a car, you can make money delivering food and groceries, or driving for Uber or Lift. Similarly, if it’s crafty, you can open the Etsy shop.
8. The sinking fund will begin
The sinking fund is money you deliberately save towards big expenses. This is because you spend your time on a monthly basis on Christmas shopping or traveling.
According to a Deloitte study, Americans spend around $1,455 on holiday shopping.
The Sinking Fund is a great way to enjoy your holidays while avoiding debt. You are ready for the costs so you can buy things without immersing yourself in a credit card or other funds.
For example, this year we can start a sinking fund for holiday shopping. If you want to save $1,455 by the end of the year, you’ll need to set aside $121.25 a month.
9. Choose a lower credit card limit
While working on self-discipline, you can choose to lower your credit card limits and you may not be borrowing much. This is because it stops you from spending beyond what you can fully afford.
The low limit also forces you to save on bulk purchases rather than relying on a credit card to pay.
10. Save money for large purchases
Speaking of which, saving for large purchases is another tool you can add to your armory to avoid debt. Plan for any expenses you need, such as a trip, a new sofa, or a home renovation project.
Set up a sinking fund for savings, or use a savings method that suits you.
11. Use free amenities
To get out of debt and not borrow money, you need to be familiar with managing your hard-earned cash. This means access to free amenities like a local library.
Instead of buying books or borrowing movies online, visit the library. Apps like Libby and Hoopla allow you to easily borrow books and movies from public libraries.
You can also check out other free amenities in your area. Visiting the community center instead will help you cut your gym membership fees.
12. Keep learning how to grow and manage your money
Many of us had no access to good information about handling grown money. So money can be a difficult topic. If you have made mistakes in the past, give yourself grace and compassion.
Next, you’ll be committed to learning how to grow and manage your finances. Spend time and effort on your personal growth and development. Read books, take courses and stay in the financial community of smart girls.
Learning will help you feel more confident in making money decisions. Discover many ways to save, invest, or start a business. And it definitely teaches you how to not borrow money.
Stay away from debt to live your best life!
In a world we are constantly engaged online, it is appealing to say yes and easily buy many things we don’t need.
Keep your spending habits in mind and start by tracking your income. I promise to be intentional with every dollar you spend.
Don’t forget that small changes will be summed up. Every step will bring you closer to a debt-free life!