If you are one of the few people with little to no debt, count your blessings. Having no debt is not easy and what is even harder is staying out of debt. Take a look at a few ways that you can keep those finances in order and avoid getting behind.
Set A Budget
This is the best thing that you can do to stay out of debt. Write down an actual budget and stick to it. Far too many people just spend money as it comes in and never really know what they are wasting their cash on. You need to be able to account for every dollar.
As far as budgets go, you do not have to be that fancy. Just write out a list of everything that you spend money on. Include amounts for things like gas, entertainment and food as well. Use a basic spreadsheet program like most computers have or simply write it out an a scratch pad.
In addition to your normal expenses, you should also be allocating 10 percent of your take home pay to savings. If you can not do that, you need to cut some of your other expenses until you can . Without a proper amount of savings written into your budget, you will not stay out of debt for long.
Save For Emergencies
Now that you have that budget written out with room in it for savings, you need to start diverting money into an emergency savings account.
One way that people get themselves into financial trouble, is not being able to handle emergencies when they occur. One thing that most emergencies have in common is that they can be helped or completely handled with money. Open an emergency savings so that you can have the money when you need it.
When you open an account, choose an account at a bank other than your main bank. Preferably at an online bank. This will prevent you from being able to instantly transfer money to your account on a whim. Online accounts generally earn more interest as well.
Keep depositing into this account until you have at least 6 months, but preferably 9 months worth of expenses saved up. Once you are done, start pushing that savings money into a long term savings or an investment account.
Have Revolving Credit But Don’t Use It
Credit cards are a necessity for building a high credit rating. Without a few credit cards, your credit profile will lack diversity and your score will suffer. Unfortunately, those credit cards can be both a blessing and a curse.
It is all too easy to put something on plastic and let your expenses and credit card debt get away from you. It has been shown time and time again that people spend more money when they pay with plastic. Use your credit card as a tool to increase your score but do not become like the average American with nearly 10,000 dollars in debt.
Put your cards away and do not use them, even for emergencies, that is what your emergency savings is for. Only use your card once every 6 months just to keep the issuer from closing it. Then, pay it off immediately and put it away.
Add Extra Income Wherever You Can
Just because you are making enough money to live and even to save 10 percent does not mean that you should not be looking to add extra income. This is especially true if you are young without a family. We tend to get complacent and a bit lazy, especially in our youth when retirement seems so far away.
Money saved when you are young is far more valuable than money saved when you are older because of all the extra time it will have to accrue compound interest. So, make and save as much of it as you possibly can.
Simply picking up one retail shift a week can add over 5000 dollars a year to your income. Put that into an investment account with a modest rate of return and you could be staring at 75,000 dollars in 10 years time.
Don’t Try To Keep Up With Friends
Do your own thing financially. Trying to keep up with friends and co-workers, when it comes to spending, has led many people down the wrong path.
If you see your friends going out and buying new cars, clothes and all sorts of shiny things, do not try to compete. For all that you know, they might make considerably more money than you do. Even more likely though, they are swimming in a mountain of debt and will have to pay the piper some day.
Instead, live smartly based on your own finances. Treat yourself occasionally, but do so responsibly.