The last thing that you want to do in this New Year (or ever) is follow the example of the United States government by making the same old financial mistakes over and over again. If something doesn’t work for you or for your situation -then you need to do your best to find another more viable way. This is not just true when it comes to your finances, but in all aspects of your life.
Breaking the debt cycle is simple really. Essentially, it all comes down to one thing. You have to spend less and make more. Since you cannot just automatically decide that you want to make more money, you have to start breaking the debt cycle by spending less every day. Financial experts agree that in order to get out of debt and stay out of debt, you have to rein in your spending.
The following tips will help you break the debt cycle. However, it is important that you prepare mentally for improving your financial condition. Remember the way you view and spend money are often extremely deeply evolved schools of thought that have been with you for a very long time. In order to make changes, you have to also change the way you think. The easiest way to do this is to start imagining your life exactly how you WANT it to be. Start envisioning what it will be like to live debt free. Use positive visualization to create a realistic goal for yourself so that you can truly believe in the possibility of living debt free. This is something you will have to work on constantly. In the meantime, you need to also follow these expert financial tips.
- Use Cash. This doesn’t mean you always have to pay with green paper cash – especially in a day and age when debit cards are so convenient. The key here is not using credit cards for any purchases, even small ones. You need to start paying for things in your life ONLY with the money you have on hand. Essentially, it is the cash money you have that will help you break the debt cycle and you have to get a realistic idea of what that feels like. Too often, people become so accustomed to living on credit that they don’t really know what it would be like to live within their means.
- Set a budget. This is one of the most important ways to break your cycle of debt. The best way to do this is to take a month and record everything that you spend so you have a reliable idea of how much things really cost. Then, at the end of the month – add up all of your expenses and see where your money is going. Chances are you will find many areas where you could curb your spending. When you set a budget, it is important to allocate money for yourself each pay period as well and to set aside a little in savings. If you are in debt, it is still vital for you to put a little away for a rainy day. Even if you can only afford to put up $5 or $10 per week, in the long run it’s worth it.
- Don’t impulse buy. Truth is that prices vary greatly on every day items from shampoo and gas to vegetables and meat. You never want to pay for something when the price is at its highest! Shop around and do some research. Not only will this help you save money, but it also requires you to stop buying in the moment. Often, when you have a few days to research your purchases you will realize that the desire to have something is not and great. Or you will find it at a savings. Plus, this helps you to learn how to respect the money you work hard for. Think of it this way. Stores are trying to take advantage of your ignorance about prices. When you spend 30-60% more on an item for no good reason, you are simply putting more of YOUR money in someone else’s pocket. Shop around, use coupons and comparison shop. This helps you to follow your budget as well and ensure you get MORE for your money.
- Don’t spend $50 on one single item without giving yourself a 7-day waiting period. $50 is a lot of money, and unless it is on something such as groceries or things you need every day – you should consider spending the amount. How long does it take you to earn $50? You should take at least this long to think about bigger purchases before handing over your debit card.
- Pay off debt with money you have on hand. If you have a savings or some sort of fund that can pay off your debt, do it. This way you can start focusing on saving money in the future. It might feel like a let down to let a large sum of money go in order to pay off debt, but in the end it will feel like relief and you can start saving money. It will also change your attitude about money and make you less likely to get back into debt.
- Take care of things that need to be taken care of. The bald tires on your car are raising your fuel bill. The running toilet is running up your water bill. The lack of insulation is running up your heating bill. The broken dryer is costing you three times as much to dry clothes. These types of things really do add up and end up costing you a lot of money in the long run. Late fees on movies or library books etc. can really add up. Respect your money and don’t waste it if it’s not necessary.
Being in debt can make you feel like you are living under water. Most people feel so overwhelmed that they don’t really know where to start. These tips will get you started and change your attitudes about money, which in the long run will help you to break the debt cycle.