Happy New Year! There are a lot of worthy New Year’s resolutions you could be making for 2019. One of the most important might be starting down the path to a debt-free life.
Debt has become an almost universal situation in the United States; more than three-quarters of Americans owe some amount of debt, whether it’s student loans, auto loans, credit card debt or a mortgage. Americans have been struggling to get their heads above water for so long, many may not remember what it feels like to live without debt.
But the benefits of a debt-free life cannot be understated. Once you pay off your debt, your next paycheck truly becomes yours. You no longer need to sacrifice part of your income to put toward your credit card bills or student loans and all the interest they accrue.
Now you can put that money someplace for you — an emergency fund, a vacation fund, a gift fund or maybe even toward purchasing other items you never thought you could afford.
There are five disciplines I recommend you adopt to live a debt-free life:
1 Ignore the Joneses
One of the many reasons we spend so much money is to keep up with our friends and neighbors. As financial self-help guru Dave Ramsey said, “We buy stuff we don’t need with money we don’t have to impress people we don’t like.” Instead of falling into this trap, ignore the Joneses and focus on your own financial situation. You can slow down your spending by imposing a mandatory 48-hour waiting period on purchases. A lot of times, 48 hours is enough time to realize you don’t really need whatever you wanted to buy.
2 Spend less than you earn
To achieve this, you need to keep track of how much money is coming in and how much is going out. That means having a budget and the discipline to stick to it. And never use credit as a substitute for cash. Your credit card must be paid off every month. If you can’t afford something, wait until you can or choose to do without.
3 Pay attention to details
You’ve heard the phrase “the devil is in the details,” and you’ll need to pay attention to those details to live a debt-free life. Take a close look at your credit card statements: Are you getting charged for a gym membership you’ve stopped using or paying for cable channels you don’t watch? Pay attention to all of your financial statements so you don’t waste money by missing a payment or overdrafting your accounts.
4 Value hand-me-downs
People who live debt-free have a habit of looking for ways to save money. Even if they can afford something, they won’t automatically pay full price for it. These people cut coupons, wait for sales and buy secondhand items at garage sales or consignment stores. They will always comparison shop before making a big purchase.
5 Think long-term
Spending a couple bucks here or there may not seem like a big deal, but what if you saved that money and invested it? Every dollar can make a difference in saving for retirement because of the power of compound interest. You’ll find it easier to avoid impulse purchases if you maintain a long-term mindset. If you find yourself struggling to think long-term, 2019 may be the year to meet with a financial professional who can help you create a plan to preserve and protect your money for retirement.
Larry Kallevig, owner of Haven Financial Group in Burnsville, helps clients create financial plans that ensure dependable and comfortable income in retirement. Learn more at havenfinancialgroup.com.