Simple Ways to Living a Debt-Free Life

Wouldn’t it be great if the only expenses you had to worry about were your groceries and other basic needs? What would you do with your extra income if you were not drowning in debt?

The average American family carries over $137,000.00 in debt. If you think that’s a staggering number, just wait – Motley Fool predicts that number to rise in the coming years.

So how do you get out of the debt trap? The first thing you need to do is stop spending. My Money Coach says the first step is to know your spending triggers. Do you overspend because of social obligation? It’s hard to say no to outings with friends, but cutting out lunch dates, golf weekends, and shopping parties is the best way to curb impulse spending. Be honest with your friends and let them know you are going on a shopping diet to save money, but you would love to meet for coffee instead of lunch, host a potluck game night at home, or learn how to make a craft together.

Pay down credit card debt. Dave Ramsey says you should continue paying the minimum payments on all of your cards except one that you will pay extra on every month until it is paid off. Start with your credit card that has the smallest balance. Make a little extra payment to that card every month until it is paid off. Now take the amount you’ve been paying on that card and add it to your payment on the next lowest balance. As you do this, you will pay down accounts to $0, reducing your debt-to-income ratio and eliminating interest on account after account.

Ask your creditors to reduce your interest rate. More often than not, contacting your credit card company and asking for a better rate results in a decrease. As your interest is decreased. More of your monthly payment goes toward the principle, helping you pay down the debt quickly.

Do you have a mortgage? Mortgage expert Jack Guttenberg suggests making bi-weekly mortgage payments instead of one monthly payment. Simply divide your mortgage payment in half and pay it every two weeks. This means you will make 26 payments a year instead of 12 – that’s a whole extra mortgage payment every year, which will shorten a 30 year loan by 5 years, and you’ll hardly miss the extra few dollars each month since you are spreading it out. If you are able to add a little extra to these payments, you will see an even faster payoff. Refinancing can be a great way to pay more toward your principle each month, but you have to be careful not to actually cost yourself more money. For example, don’t renew the term of your loan – if you’ve been paying for 5 years, you don’t want to start over just to pay less monthly. Don’t take any cash refund, either! Apply everything the bank offers to cash out to you right back to the principle.

Have a garage sale to start your emergency fund. Garage sales are great ways to get rid of your old stuff, but they are also great ways to build up a savings account. Often, we take out garage sale earnings and go spend it on more stuff. Instead, take all the proceeds and open an emergency fund account. Devote to adding $10 per paycheck. When you have an emergency fund, you won’t need to rely on credit cards to pay a bill if you miss some work or have an emergency, such as a pricey car repair, arise.

Pay with cash and save your change. Start over with your spending and commit to only using cash to pay for things – no more credit! Set a rule of no swiping – that is, anything you pay for in person must be paid in cash. When you receive change for a purchase, you are not allowed to spend it. At the end of the day, place the change in your pockets or wallet into a change jar at home. Count the change at the end of the month and use it to make an additional payment toward a credit card, auto loan, or student loan.

Using these methods will help you get out from under your debt quickly and easily. You can finally live a debt free life and look forward to saving for your future!