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There’s nothing too strange about Americans being in debt for years, and now it has become a roadmap for them. According to a study by PR Newswire, 54.2% of Americans live a debt-free life.
Living debt-free requires careful investment, budget planning, and even a bit of luck. It’s not a chill pill to pull yourself out of a debt-free lifestyle, but you must find a way to live without debt.
So, do you even know what it takes to live a debt-free lifestyle?
If you don’t!
Then come with us! This blog post is here to enhance your knowledge of maintaining a debt-free lifestyle.
Living a Debt-Free Life – 10 Ways to Maintain Debt-Free Lifestyle
1. Time to Prioritize Savings!
If you want to embrace a debt-free lifestyle, you need to have precise priorities regarding how and where to spend your money. With the growing time, you’ll be able to differentiate between needs and wants. You’ll resist more impulse buying and look for long-term value while making big and small purchases.
However, to live without debt also means to quit specific luxuries in a short span. For instance, to avert mortgages, you might live in a rented house while you do the savings. Such a living is not the ideal living condition for everyone.
2. Tracking Every Penny (Cash Inflow & Outflow)
Tracking every penny, whether it’s a cash inflow or outflow, is a great way to maintain and live a debt-free life. Exercising financial self-control is a good habit instead of spending money unnecessarily. Follow a budget and track your funds with the help of the Expensify app. Tracking and budgeting are the two tools that stand strong in living a debt-free life and becoming stress-free, too.
3. What if You Treat Yourself with a Reward System?
Don’t restrict or be afraid to treat yourself with rewards as you face all the challenges that eventually come with living a debt-free life. Small reward benefits will surely inject positive reinforcement and keep your good spirits up.
It’ll be too hard to maintain some changes. Whether you prepare something fancy for yourself, reach a big milestone, or take a vacation trip, it’s essential to reward yourself regularly so that your debt-free lifestyle doesn’t look like a huge burden.
4. Debt Paydown Strategy Can Work Here
Amongst the numerous popular ways to pay down debt, we have listed a few of them for you. And here we go!
Debt Avalanche
The Debt Avalanche method works excellently for those who love to work with numbers and lower their debt. This method allows you to first eliminate your highest interest debt while doing minimum payments, which helps you to become more savvy on interest charges.
Debt Snowball
The Debt Snowball method allows you to first eliminate the small debts and then head towards paying the large ones. It majorly focuses on the momentum being made. This method helps you mentally handle your large debt balances.
Debt Counseling
If you’re in large debt and have limited ways to pay it off, you should seek debt counseling from financial experts. This can help you pay off all your debts and get started with a repayment strategy.
Debt Consolidation
Despite handling multiple (approximately seven to eight) debts at a time, it can be beneficial to set everything aside at once with the help of a debt consolidation strategy.
5. Know the Amount of Debt
After paying off your debts, the first focus is to figure out where you are and what you are up against, which can be an agonizing part of your life.
Falcone, a famous financial expert, says, “Log in to all of your financial accounts,” “Open any unopened student loan bills or credit card you have received. Then, take stock of each of your debts. Jot down the minimum payment, interest rate, and balance for each. Lastly, add all of the balances together to precisely know how much debt you’re left to pay off.
6. Be Specific About Your Spending
You won’t like restricting yourself with limited or specific spending if you’re an impulse shopper. However, it is the amount that can be saved with the help of a simple strategy: “Think twice before you buy anything,” this can work tremendously.
Search for the best deals and listen to your inner voice asking, “Do I genuinely need this item?” You do not have to be a hermit to bring out your minimalist consumer side. If you know, you may need to follow strict guidelines to keep your money-saving mindset in working mode, that’s why creating a budget and setting some rules for yourself is crucial.
7. Avoid Rents
Paying rent for a lifetime might be a huge nightmare, but what about real estate? Real estate is not a cheaper option to rely on. Housing is likely your toughest challenge if you want a debt-free lifestyle. You might have heard – “saving up for a modest home is credible for many middle-class Americans.
It could be a time-consuming process, depending on your income, but spending a huge amount of time (in years) saving and renting could be a rewarding experience.
Long-term renters know this lifestyle has hardships and frustrations, but no worries! Thanks to some landlords and affordable renter’s insurance.
8. Build Savings Fund
Aiming for a sizable savings account is a tough call, though it is a proven way to live debt-free. Start treating your savings as if you’re getting prepared for uncertain expenses. Similarly, when a car repair or medical bill comes in, look no further!
Saving is necessary for all types of planned and unplanned expenses, including a new home or a child’s education. Your savings can also be a great route to enjoyable purchases, like an impromptu trip, right? However, you cannot do anything without a hefty balance in your savings account, as life is full of uncertain costs that will hamper you and be a huge threat to your lifestyle.
9. Tax Benefits Could Heal You
Loans, including home equity, student loans, or mortgages, may provide you with tax benefits. Paying off these loans should be your lower priority in comparison to paying off credit card debts or car loans.
Your first obligation (from the above list) should be to receive your highest debt payment. Pay the minimum amount on all your loans, and after paying off your first obligation, it’s time to give yourself a pat on your back and move on to the next item. Continue to pay your highest debt payment to your top loan and work towards them until you reach the first mortgage on your list.
10. Consider the Term
Rank or prioritize open-ended liabilities above fixed-term loans. For instance, a car loan has a fixed term, and if you schedule your payment, you can pay off the loan amount within a defined timeframe.
However, credit cards have no fixed term; they are open-ended liabilities. Thus, making minimum payments could cost you a lot (probably years of interest payments).
How Debt-Free Lifestyle Impacts Your Life
1. Lesser Financial Risk
Falling into debt without the cover of an emergency fund could put you down in a pickle by suffering a job loss or financial hardships. Living a debt-free life offers wiggle room to your budget in case things turn awry; you have a cover or trampoline to fall back on without getting tense. Living without debts also means worrying about more drastic scenarios, late payment fees, and losing your car or home.
2. Get Retired Earlier
If you take too much time to pay off your debt, you can easily release the extra money for retirement savings. Without any liability of making debt payments, you are free to keep more money in a separate account for fulfilling future goals and retire earlier than it is expected to be.
3. Maximum Income is Available to You
The amount of your income you kept to pay off debt becomes fully yours so that you can use that income on your terms. It feels like you’re earning more and making fewer payments. Whether you keep that income towards monthly expenses like paying medical or electricity bills, you can now enjoy the financial freedom that debt-free living holds.
4. Improved Credit Score
Paying credit card debt can offer you a better credit score with many other benefits, like lower insurance premiums and better interest rates on any loans that you’re willing to take in the future. Moreover, it can increase your desire to landlords or employers who assume that a good credit score is a key factor to reliability.
5. Improved Physical and Mental Health
Falling in debt can be a huge headache for you. Stress can manifest here in the form of various health issues like high blood pressure, insomnia, or pain. Your physical health follows your mental hand as well. Becoming free from debt can reduce your anxiety level and help you excellently get off to bed.
Anything Else?
Living a debt-free life is the key to a happy and stress-free life. You can easily maintain and live a debt-free lifestyle by following simple tips like debt paydown strategy, building a savings fund, prioritizing savings, keeping track of every penny, and more.
These tips will help increase your credit score and reduce your financial risk. So what are you waiting for? Adopt a healthy, debt-free lifestyle to achieve your long-term financial goals and enjoy financial autonomy.
Happy Financing!
