How to Stay Out of Debt

These five habits will help you get out of debt and keep you from ever going back

There’s a big difference between becoming debt-free and staying debt free — just ask someone who has paid off a loan, only to turn around and get another one.

For many people, debt can be an addiction. They’ve been borrowing money as long as they can remember, and they can’t imagine their lives without a car payment, student loan, credit card or some kind of other consumer debt. Like most addicts, these people may make an effort to get clean every now and then. But without serious support and life change, the habits always bite back.

Unfortunately, some people who work hard to become debt-free end up going back to their old ways because they don’t have the discipline to stay clean.

This doesn’t have to be you, though. Anyone who has successfully overcome an addiction will tell you that they’re never cured, but always in recovery. And they can never let down their guard, lest their old demons return.

The same is true of debt. If you’re addicted to the borrowing and spending, it’s going to take a lifetime of discipline and recovery to get free and stay free.

Whether you’re still working on getting out of debt or have recently become debt free, here are five tips that will help you achieve and maintain financial freedom.

1) Budget, budget, budget.

A budget is the number-one tool that helps you get out. And it’s also the number-one tool to help you stay out.

Good budgeting is essential for any kind of financial success. A budget is a plan that tells you exactly what you’re going to do with your money every month. Without a budget in place, you’re sure to spend more money than you think you’re spending. When that happens, you end up short on cash and tempted to borrow money to make up the difference.

Don’t let this happen to you. Create a budget and stick with it… for the rest of your life.

2) Save for emergencies.

Many people get in to debt because of some unforeseen emergency that they didn’t have enough cash to pay for.

Emergencies can take us by surprise. But they really shouldn’t. Although we can never predict exactly what kind of emergency will happen or when, we can count on the fact that things will go wrong in life. And that those events will cost us money.

To stay out of debt, plan for those things now and begin saving for emergencies before they happen. You may not have done much emergency savings while you were getting out of debt. If you’re debt free, though, saving for emergencies is essential to staying that way. This article gives you some good guidelines about how much savings you need.

3) Plan strategically.

Budgeting helps you manage your everyday expenses, and emergency savings prepares you for financial catastrophes. But what about those big expenses that are coming down the pike?

Big life events, like getting married, buying a car, buying a house or going to or college, come with big expenses. People borrow money for all of those things, and it’s often a mistake.

In order to stay debt free, you need to think strategically about the things that will be happening one year, five years or 10 years from now. Begin forming a plan that will leave you with plenty of cash to pay for those expenses when the time comes.

Saving bit by bit for years will help you stay out of debt when the big day finally arrives.

4) Carry good insurance.

Insurance can be a boring or even annoying monthly expense… until you need it.

Chances are that sooner or later you’ll have a medical, vehicular or home event that costs a lot of money. Having good insurance coverage removes the risk of paying those expenses from your life.

Although it can be very budget-friendly to carry little or no insurance, it’s not good for your finances in the long run. If you don’t have the insurance to pay for big medical incident or car wreck, one catastrophe can wipe out all of your savings and leave you in debt.

Don’t take chances with your financial future. Carry good insurance to protect yourself against the unexpected.

5) Get some accountability.

The best way to win is to surround yourself with other winners. If you want to get free and stay free, surround yourself with other people who are doing the same thing.

Talk about your finances with people you trust and respect. Ask them to hold you accountable to your standards of living debt-free. Take some time to help other people on their own debt journey.

Money conversations can be awkward, but awkwardness is not reason enough to avoid accountability and support. A little bit of awkwardness is a small price to pay for financial freedom.

If you have won the battle of getting out of debt, don’t lose the war by falling back into your old habits. Follow these principles and make your life a testimony to the power of recovery.