The following is a guest post from Tisha Tolar. Ms. Tolar is a writer for DebtFreeDestiny.com, where she provides information about credit card consolidation, debt relief and how to get out of debt.
For years many consumers have been in denial regarding their debt and personal finances. This was made easier by the almost guaranteed availability of credit to just about anyone with a job. Don’t get me wrong, not every person in the country has been charging their way through the last few years, but a good portion of the population simply seemed to forget that one day they would in fact reach their limit.
One of the positive results of the recent recession is the new found awareness of the need to properly manage your money and live within or preferably below your means. With so many people suffering job loss and dwindling savings, the reality of their debt situation has been brought to the forefront. This has been a hard yet necessary lesson for people living beyond their means and has caused many consumers to re-evaluate how they are handling their money. Now as those same people work to reduce their debt and save more money, they are faced with another issue looming on the horizon. Once debt free, what will they do to remain so in the future? Here are three tips to help people stay debt free.
- Understand how you got in debt- We all know that getting in debt is much easier than getting out of debt, but for some people it is important to know what exactly led them to that position. Was it a financial hardship, such as unemployment, injury, divorce or some other issue that you had little control over? Or did you find yourself in debt as a result of not paying attention to your finances? Knowing how and why you got in financial trouble the first time around can help you avoid the same mistakes in the future.
- Lose the “I’m already in debt attitude”- If you have successfully paid off debt in the past, you know how hard it is achieve debt freedom. Unfortunately there are just some people who are hardwired to believe once they have a debt, any debt, they might as well continue to charge purchases because they already owe money. I know, it is a backwards way to think but believe me, it happens. Consider you have a credit card that is paid off, then you have to make a purchase using that card. Well you already have to pay that off, so what is another twenty, fifty or hundred dollar charge. That is how many people with thousands of dollars in debt start out. If you must use a credit card for an unexpected expense, pay it off as soon as possible and avoid charging other purchase on that card.
- Save your debt payments- When you think about it, if you are able to pay hundreds of dollars toward debt repayments you can likely live without absorbing that money back into your budget once your debt is paid off. Take all or even some of that money and start socking it away in savings or investments for your future. You will be amazed at how quickly that money will grow, which will put you in a better position to avoid needing credit cards or loans in the future should unexpected expenses arise.
Getting out of debt is hard work and undoubtedly not easy. If you have made the effort and sacrifices necessary to pay your debt off once and for all, make sure you have learned from your past mistakes. By changing your lifestyle and your way of thinking it is quite possible to change your financial future.
Megan is a 30-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.