Sounds simple, right?

Living debt free is a simple concept: Spend less than you earn, and accrue no debts. Pay as you go. Sounds simple, right? So, why are so many people unable to do it? We’ve heard it before… “live within our means,” “develop budgets”. But in the end, most people inevitably find themselves in the hole, trying to dig out. Why are they facing mounting bills?

Permanent lifestyle changes

Going back to the basics, being debt free happens when you spend less than you earn and are committed to live that way. It means developing a plan, and seeing it through long enough to get out of the hole, and not going back to your old habits. But in order to stay debt free, you need to plan for the long-term and make permanent lifestyle changes. Eliminating debt is only half the battle; you also need to develop sound financial skills to keep you on track down the road.

Plan now for those expenses

So, how do you plan for a future that involves minimum debt? “Debt free” is a misnomer, as few people can afford to pay cash for a home or car these days. First, develop a long-term financial plan. Do you want to buy a home, or a new car, in the next five years? Are you planning to start a family? Plan now for those expenses, and start putting money away. Instead of waiting until after the purchase to budget for the $300 car payment, start setting it aside now, and use it as a down payment. Remember, less money borrowed means less interest paid. Here’s a thought… forego the new car and buy a used car for cash or a lesser loan?

Budget, be honest about your expenses

Next, develop a realistic budget. Budget is not a bad word. In fact, except for our governments, successful people and corporations live by budgets. To create your personal budget, you must take into account your current expenses, your long-term plan, and the development of an emergency fund. Every budget should also include some “me” money – this is cash you can spend, without strings or thought, on whatever you want. Be honest about your expenses and goals when you develop your budget – this needs to be a plan you can follow for years, not for weeks or months. You need to think of a budget as a life plan to reach your goals, not a restriction on your money.

Discipline, follow it through

Finally, you must face the hardest part of staying out of debt – making these plans part of your everyday lifestyle. Most people don’t fail because they have a bad plan; they fail because they lose sight of the plan, and don’t have the passion and discipline to follow it through. Now that your budget and long-term plan are done, stop debating and discussing them – it’s time to follow through, and live by the decisions you made. You may need to be brutally honest with yourself, and take some drastic actions to make this work: If you tend to use your credit card impulsively, then take it out of your wallet and leave it at home. If you enjoy shopping with friends, only go when you have “me” money to spend. Only shop in places that fit into your budget (there’s no point test driving a Mercedes, if you can only afford a Kia) to minimize temptation. Practice saying “no thank you.” Remember, this is your money.

Retrain your thinking and spending

Yes, debt free living is a simple concept, and one not easily executed. Many of us have spent our entire lives learning to live in debt; it will take time, commitment, and skill to retrain our thinking and spending, and get us back to living this way. Living debt free requires change, and change is a process. We will face setbacks, make mistakes, and wonder “Why did I do this?” at some point. But in the end, adjusting our lives in these simple ,yet crucial, ways will provide many benefits.

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