Debts > 10 Tips for Staying Out of Debt

Being in debt especially a heavy one is a terrible thing. If you are one of the many unfortunate ones, the best you can do is to keep afloat, stop unnecessary spending, keep stock of personal finance, find out why you are in debt in the first place and work hard at reducing your debts. Here are 10 tips that might be helpful for staying out of debt.

1. You need to change

You need to make changes to your attitude about money and behavior in order to have any result at reducing your debts. How you value money impacts your spending decision. Find out why you feel good owning the latest tech toys even though you might not use it at all. Is it for vanity reason? Or is it for making up of lack of toys when you were a kid Find out how much ‘coolness’ is worth to you. Getting out of debt is not a todo list or action items, its a lifelong commitment to a lifestyle change.

2. Cause and effect

Before you spend on your next purchase, check the consequence of your action especially if you are buying on credit. Shopping on credit card makes you feel good NOW, but the painful impact comes much later. Think about the future credit card bill and the pain it will bring before you buy. You would jump off a hot seat immediately because of the pain, why not for shopping on credit?

3. Understand your justification

If you are in debt, buy only the necessity. Check your justifications on why you buy, many of them are just excuses that make you feel less guilty about the purchase: “I need to pamper myself for just one last time”, “I have been working very hard and this is my reward”, “I save more when I buy it now during the promotion”.

4. “Never spend your money before you have it”

This is a quote more than 180 years ago by Thomas Jefferson.

5. About credit cards

Keep using credit cards if and only if you can pay off your bill every month.

6. Think in terms of percentage

Use percentage instead of absolute value when comparing risks and returns for a better financial decision. A credit card that charged you $90 interest for a $6,000 balance is a cheaper card than one that charged you $35 for a $2,000 balance.

7. Pay yourself first

When you are buying something, you are paying for the livelihood of people who build and sell the product or service to you. Instead of buying things and paying them, you should pay yourself first by keeping a portion of your income for savings and for clearing debt. Why make yourself miserable at the end by making other people happy?

8. Personal finance management

Learn about personal financial management basic, an essential skill that is rarely taught in school. Beware not to fall into the trap of spending big sum of money for dubious personal finance education and seminar.

9. Multiple streams of income

View yourself as a financial entity like all company and business do. Businesses are constantly looking at better ways to manage their resource and at reducing expenses. We can do the same as individual. It is common for business to have multiple streams of income, why not us as individual?

10. Earning money vs spending money

Measure the amount of effort and time you spend on earning money vs spending money. Are you one of those who can spend many hours or days online reading forums and reviews to make sure you get the best deal on a digital camera? You should devote more of your time and effort on activities that can lead you to earning more money.

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