How to live debt free

I don’t know that I’ve ever heard anyone proudly exclaim that they have debt. Usually, the tone is more regretful, coupled with resignation. Mostly, the topic of debt is not brought up because it’s something we don’t like to talk about. For some, this might be because it brings up feelings of shame or sadness.

Yet, debt continues to be used, and used on a large scale. Americans have the highest rate of credit card debt ever. Debt is easy to use, highly accessible, and makes it possible to have things we might not otherwise be able to get in the moment.

 

Having debt is often one of the parts of personal finance that brings about the most stress. Debt is what makes it challenging to pay bills, have enough money to get by, save or invest. Even though it causes stress, it can feel impossible to stop the cycle.

 

If debt free is your goal, how do you get there? Here are the steps I’ve taken to live debt free:

  1. Stop using debt. Write down the amount of debt you have today. This principal amount will not get higher if you stop using debt.

  2. Ensure your income is greater than your expenses (or your expenses are lower than your income).

  3. Look back at the last year of expenses and find any expense that felt like an emergency or like you had to use credit for it.

  4. Plan for any expenses you found in looking back that felt like emergencies or like they required credit. Include those expenses in your budget, just like you include a mortgage or rent payment. Plan for any variable expenses in your budget.

  5. Have some emergency savings, but create boundaries. It’s not to be used for anything you could have otherwise saved for or budgeted for. It is meant to be used to save you if you have an emergency.

  6. Any extra money each month can be used to pay down existing debt.

 

In my experience, true financial wellness comes when we don’t have debt. Not having debt means we don’t have financial obligations for past purchases. It means we need less income. It means we have more freedom.

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