Getting out of debt isn't easy, but when you make that last payment and become completely debt free, the overwhelming relief and freedom you gain from accomplishing such a huge feat can make it all worthwhile.
Anyone who has paid off significant debt will tell you that the journey to becoming debt free was a long and difficult road, paved with a lot of hard work, determination and sacrifice. As a result, it's completely understandable that newly debt-free people may want to reward themselves for a job well done. The problem, however, is that if you're not careful, it's easy to slide back into the same spending patterns and end up right back where you started.
Getting out of debt is hard, but staying out of debt can be even more challenging. Here are a few lessons that may help you stay on track, avoid a debt relapse and keep you out of debt for good.
1. Loosen up on the budget and breathe, just a little
You've come a long way and now you've earned a little breathing room. Don't go crazy, but do give yourself permission to spend a little more on creature comforts (so long as you can really afford them) so that you don't feel so deprived. Moderation is key.
2. Pay with cash — or charge only what you have the cash on hand to cover
Look, credit cards aren't bad. It's the temptation and how we use them that can be bad. Doing away with credit cards altogether could impact your credit and your ability to leverage money. Therefore, make a promise to yourself — especially if credit cards are a weakness for you: Limit the number of cards you use to two and only charge what you know you can pay in full when the bill comes in.
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3. Don't splurge. Plan.
If you want to take a cruise or buy the latest HD TV, plan the purchase and save the cash upfront. This won't give you the instant gratification of getting what you want "right now," but if you plan it, you can still get what you want without the guilt of spending money you know you don't have and racking up debt that will weigh you down later. Plus, if you've got the cash on hand, you can still charge it, pay it off immediately, and benefit from any credit card rewards that may be available to you.
4. Identify your money triggers
What is the one thing that you find very hard to resist buying? It could be the latest electronic gadget, clothes, art, vacations, eating out — you name it. It's the one thing you just can't seem to stop yourself from spending money on if it's right in front of you. These are your money triggers. By identifying your weaknesses you can avoid impulse spending by removing the temptation — or by avoiding the temptation altogether. Mine happens to be electronic gadgets. It seems I can't walk into an Apple store without dropping a few hundred dollars, so I remove the temptation by avoiding the store entirely. And when I do need something, I order it online to keep from having the merchandise right in front of me. It's just too tempting for me to resist.
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5. Redirect the money you spent on debt payments each month to savings
After you've paid off all your debt, take the extra money you now have each month and continue making those same payments towards your savings instead. Every penny saved is another penny toward financial insurance for unexpected financial emergencies. Everyone should have an emergency fund, and with the state of unemployment and the current economic outlook, the old standard of saving enough to cover your expenses for 3-6 months is now closer to 8-12 months for emergency funds.
6. Develop a support group of likeminded debt-free friends
If the people who surround you make it hard to stick to your debt-free lifestyle, it's time to create a new support group of those who will. They'll relate with your struggles because they've been there, too. When your mother-in-law is upset because you won't join the family on a cruise for next year's Christmas holiday (when you can clearly charge the excursion), your support group will stand behind you and cheer you on for making the right choice, despite any guilt or pressure from family and friends that want you to "keep up with the Joneses."
7. Never forget the nightmare of how living with debt felt
The last lesson, and probably one of the most important, is to never forget the everyday stress and anxiety that you fought so hard to eliminate from your life. You were there once, and remembering how it felt can be an incredibly effective reminder of why you continue to fight every day to make sure you don't fall back into the same destructive pattern.
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