Life as an adult does not require indebtedness, even though the two seem to be inseparably connected. Unfortunately carrying debt has become the norm, and we have become less sensitive to carrying high levels of debt. While the social stigma has faded, high debt payments can cause stress, erode disposable income, and create major financial problems, when not managed appropriately.
Choosing not to incur debt will save you from the demands for payment that come once the debt is in place. Whether you are just starting out, or trying to get out from under a debt burden, making a conscious choice about new debt accumulation gives you more control over finances.
Taking steps to control debt accrual for the long term can be accomplished through the following steps.
- Evaluate the need for continuing education. Training is not completed with a four-year college degree, never to be pursued again. Updating and maintaining current skills is essential for advancement in most industries. With college costs soaring it may feel like you must incur thousands of dollars in debt just to stay employed. Rather than continuing to seek more schooling through the traditional college structure, consider your goals and needs to decide the best route. Perhaps a community college offers the classes you need. Specialty schools can sometimes complete programs in months rather than years. Employers may offer reimbursement for additional schooling. Compare options with your needs, before adding new debt for advanced educational needs.
- Are you financing your lifestyle through debt accumulation? Income changes overtime, and unfortunately, it does not always go up. Are you living beyond your means because you have “gotten used” to a certain lifestyle? Does discretionary spending now feel like essential spending? When you put most or all spending on a credit card balances can grow to unsustainable levels quickly. This can happen before you even realize you are over spending. If debt balances are growing, and you cannot pay the full amount each month, putting a spending plan in place will help you “see” where the money is going.
- Know the value of what you are buying. So much of money goes towards items that have little long term value. We live in a disposable world surrounded by conveniences. You may find yourself replacing things that break, even if it provided little value. Other areas of spending that goes unnoticed is on convenience items like fast food restaurants, kick-knacks, and habit spending on items like daily lattes. These items provide limited value and are often forgotten before the credit card bill arrives. Eliminating this spending will not only reduce debt accumulation but can free up funds for investing and other long term financial goals.
- Avoid overpaying for new technology. Just as you would never buy a stock high and sell it low as a long term financial strategy, buying the latest technology, only to have it depreciate quickly, is a bad investment. Often the next generation model offers very few new benefits. Car designs, cell phone features, laptop bells and whistles, remain similar from one year to the next. Companies what you to continually upgrade, and a new model brings the price down for past versions. This depreciates the value of your purchase quickly. Instead, buy a year-old version of the product at a substantial discount, while still enjoying most of the same features and benefits.
- Is it memorable? Most talk of saving money is centered around being frugal, not spending, cutting back, and making sacrifices. Doing this can become depressing if you don’t have positive memorable experiences to look forward to. Instead of spending the bulk of your money of everyday things with little value, focus spending on making memories and obtaining value. If you eat out so often you barely notice what you eat and the restaurant you visited, cut back on casual dining and only eat out when it will be an experience you will cherish. Vacations, holiday spending and other events can be treated the same way. Don’t buy 10 mediocre gifts that will be forgotten in a few days. Buy one or two gifts that will be enjoyed for months or even years.
- Be comfortable with housing payments. Being house poor limits discretionary spending and can make you feel poor, even if you live in a large house. Be comfortable with payments will give you room for other important financial goals. More square footage can also include higher utilities, more furniture and overall a higher cost of living. Housing costs or more than the mortgage or rent payment. Struggling to make the house payment may lead to charging other essentials like food and transportation. Ways to accomplish this might include; buying a smaller house in a good neighborhood, purchasing a fixer upper, or living a little further away from the action. There are many ways to find affordable homes within your price range.
- Take advantage of discounted travel and entertainment. Fun and entertainment is an optional cost, but everyone wants to have a little fun. Living within your means should not eliminate entertainment. Find local activities that are free. Libraries, local parks, and free concerts are available in every major city. Find out what days offer free admission to local museums and schedule a trip around those days. Volunteer at your favorite venues in exchange for passes. Frequent state and national parks that are close by. Purchase annual memberships to someplace you want to attend often. Seek out entertainment discounts through Living Social. Travel off season. You can enjoy the many resources in your community while still staying on budget.
- Pay attention to wardrobe costs. Work dress codes can leave you over spending on clothes. Buying items that go with several outfits to save money. Look for the lowest price on trendy items, while going for quality for long lasting styles. Accessories are also a great way to jazz up outfits at discount prices.
- Can you buy it used? Tools, appliances, sports equipment, and exercise equipment are often bought and then rarely used. Instead of buying new, take it off someone else’s hands at a steep discount. For items that are only used occasionally compare the price of renting rather than owning.
- Add debt carefully. Debt can serve as a building block to wealth. Educational debt can increase salaries and be more of an investment than an expense. Home values can appreciate over time and give you payments are controlled with a fixed rate mortgage. All debt carries some risk, just as any other investment does. Being smart about what debt you take on can increase wealth rather than burden you with the weight casual debt brings.
Acquiring debt is not required for living a quality life. Most of us have no desire to live like a pauper and leave millions to a favorite charity. However, making debt payments on purchases we have long forgotten is a burden that weighs on your mind and your wallet. Living a quality life is not about how much you own, but about what you do with the time and money you earn.