Six Strategies for Staying Debt-Free
If one of your resolutions for the approaching New Year is to get–and stay–out of debt, you may be tempted to lock away your credit cards and vow never to use them again. But there’s no need to be afraid of using your cards. The truth is, credit cards are a very useful financial tool. Used the right way, it’s even possible that credit cards can help keep you out of debt. Here are six ways to stay debt free, all without tossing your credit cards.
1 – If you’re still trying to get out from under an outstanding balance, transfer the debt to a new credit card. Look for a balance transfer credit card offer that gives you at least a year to pay down debt without paying any interest. If you’re paying off a balance on a high-APR credit card, the savings could be in the hundreds, even thousands, of dollars, and shave years off the time it takes you to pay off the debt.
2 – Make a budget. If you haven’t, sit down ad write down how much you make, how much you spend, and how much you need to spend each month. Use financial planning software, a money management app, a spreadsheet, or just a plain old pencil and paper, but make sure you write down your fixed expenses, discretionary spending, debt payments, and income. If your spending outpaces your earnings, decide where you can make cuts.
3 – Implement a mandatory waiting period before making any big purchase. If there’s something you need and it costs more than, say, $50, decide how long you’ll wait before pulling out your payment information. If you still want whatever it is after 24 hours or a week, then go ahead. This will cut down on impulse spending and help you stay out of financial hot water.
4 – Consider taking a part-time job in addition to your regular job, so you can earn a little extra to pay down debt or stay out of it. If you want to spend more, you need to earn more. Moonlighting, freelancing, starting your own business, or working a few extra hours can make a big difference to your bottom line.
5 – Use credit cards wisely. If you’re not in debt, don’t be shy about using credit cards to finance big purchases. Use rewards credit cards to get the most bang for your buck and rack up points, cash back, or travel rewards. Just be sure to pay off all your credit cards in full each month, unless you have zero percent interest on purchases and have made a plan to pay off the balance before the interest kicks in.
6 – Keep a close eye on your credit reports. Order a copy from each of the big three credit bureaus once a year, at a minimum. Make sure all the information is correct and there’s no hidden medical debt or other nasty surprises on your credit report, and you’ll reap the rewards of a high credit score.
Following these six steps will keep you debt free and help use your credit cards without guilt or worry.
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