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Friday, March 04, 2011

Debt Free Living these Days



Is it Even Possible in These Times?      

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Sounds simple, right?
Living debt free is a simple concept: Spend less than you earn, and accrue no debts. Pay as you go. Sounds simple, right? So, why are so many of us unable to do it? The financial experts tell us to “live within our means,” give us plans to get out of debt, and help us develop budgets. But in the end, most of us inevitably find ourselves back in the hole, trying to dig out. Why didn’t it work? Why, after paying off all of our loans and credit cards a year ago, are we facing mounting bills once again?

Because it is not possible to be totally debt free - but manageable!
Permanent lifestyle changes
Going back to the basics, staying debt free happens when you spend less than you earn and are committed to live that way. How did you get out of debt last year? Chances are, you developed a plan, saw it through long enough to get out of that hole, then went back to your old habits. But in order to stay debt free, you need to plan for the long-term and make permanent lifestyle changes. Eliminating debt is only half the battle; you also need to develop sound financial skills to keep you on track down the road.
Plan now for those expenses
So, how do you plan for a future that involves minimum debt? “Debt free” is a misnomer, as few people can afford to pay cash for a home or car these days.
First, develop a long-term financial plan. Do you want to buy a home, or a new car, in the next five years? Are you planning to start a family? Plan now for those expenses, and start putting money away. Instead of waiting until after the purchase to budget for the $500 car payment, start setting it aside now, and use it as a down payment. Remember, less money borrowed means less interest paid.
Budget, be honest about your expenses
Next, develop a realistic budget. Budget is not a bad word. In fact, successful people and corporations live by budgets. To create your personal budget, you must take into account your current expenses, your long-term plan, and the development of an emergency fund. Every budget should also include some “me” money – this is cash you can spend, without strings or thought, on whatever you want. Be honest about your expenses and goals when you develop your budget – this needs to be a plan you can follow for years, not for weeks or months. You need to think of a budget as a life plan to reach your goals, not a restriction on your money. Don’t know where to start? There are many programs and professionals around that can help you develop a sound budget, if you need assistance.
Discipline, follow it through
Finally, you must face the hardest part of staying out of debt – making these plans part of your everyday lifestyle. Most people don’t fail because they have a bad plan; they fail because they lose sight of the plan, and don’t have the passion and discipline to follow it through. Now that your budget and long-term plan are done, stop debating and discussing them – it’s time to follow through, and live by the decisions you made. You may need to be brutally honest with yourself, and take some drastic actions to make this work: If you tend to use your credit card impulsively, then take it out of your wallet and leave it at home. If you enjoy shopping with friends, only go when you have “me” money to spend. Only shop in places that fit into your budget (there’s no point test driving a Jaguar, if you can only afford a Kia) to minimize temptation. Practice saying “no thank you.” Remember, this is your money.






Retrain your thinking and spending
Yes, debt free living is a simple concept, and one not easily executed. Many of us have spent our entire lives learning to live in debt; it will take time, commitment, and skill to retrain our thinking and spending, and get us back to living this way. Living debt free requires change, and change is a process. We will face setbacks, make mistakes, and wonder “Why did I do this?” at some point. But in the end, adjusting our lives in these simple ,yet crucial, ways will provide many benefits.




Some people may be in too far over their heads and would benefit from some simple professional help. Professional help with managing existing debt – with an approach to get out of debt, or maybe debt consolidation of an out-of-control mix of debts.

The Total Money Makeover: A Proven Plan for Financial Fitness

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