5 Fast Rules For Debt-Free Living

5 Fast Rules for Debt-Free Living

1. Don’t spend more money than you earn. The key is sticking to it!  Set a budget and don’t veer off. Don’t use credit cards, but instead patiently save and pay cash for extras that you want. Also create a minimum $1,000 emergency fund to avoid the use of credit cards and borrowing money. 

2. Save 10% of your paycheck no matter what. Save at least 10% from every paycheck and put it away. Building your nest egg will free you from borrowing from other people and financial institutions when a crisis occurs — and one will!  Consistently saving your money will allow you to take care of what is necessary when needed, which is a big stress reliever. A strong savings account will allow you choices; like helping others who are in need, taking nice vacations, saving for the future, and enjoying the fruits of your labor in many other enjoyable ways.

3. Never lease or buy a brand new car.  This one rule will save you more money than you can  imagine.  Money you can use to pay other debt with, plan for retirement, or apply to your mortgage, etc. Purchasing a new vehicle, or leasing one, is like throwing cash out the window. And many people pay their car loans off then turn around and buy a new one and start all over again. The initial owner of a brand new car takes the biggest financial loss the moment they drive it off the car lot. You don’t want to be that owner! If you are not careful, consecutive vehicle loans will become a lifelong obligation and hinder your financial freedom.  Consider a nice, used vehicle in good condition, with low miles that you can afford to pay cash for. Then maintain it on schedule and as needed and drive it for as long as possible.  Maintenance and repairs will generally cost less per year than 12-monthly car installment payments do over a five year loan term.

4. Pay cash for your education. Pursuing a college degree often means carrying long-term debt, sometimes for up to 20 years after graduation. Paying for classes as you take them may extend the length of time it takes to get your education, but you will also graduate debt-free and avoid paying a large portion of your new earnings back to the bank. 

5. Pay cash for your home. This may seem impossible, but it can be done. In fact, I know several singles and couples who have lived frugally to save cash and buy their first house. Some lived with their parents and socked money away until they had enough to pay for their first home.  There are many creative ways to earn and save enough money to pay for your first home in full. 

I hope these 5 rules encourage you to begin taking steps toward living your life debt-free. They may seem extreme, and yes they will challenge you, but with patience and willpower they are attainable.

For more great tips on living a financially free life, read “The Total Money Makeover” written by Dave Ramsey. His book will guide you on how to begin paying off bills fast, save like never before, and invest in very simple and smart ways for your future.