7 Ways To Kick Debt To The Curb – Even On a Low Income
(DailyDig.com) – With nearly two-thirds of Americans saying they live paycheck to paycheck, including nearly half of families earning six figures, people with lower income levels might feel like going into debt is the only way to live.
But living in debt will cause strain on a person’s health, psyche, relationships, and more. Dealing with life from a perspective of financial stability — no matter the income level — always feels better than dealing with life from a perspective of debt.
These seven tips will help individuals and families live life within their means without feeling the need to incur debt;
Pay with Cash
Making payments in cash always confirms a person is spending within their limits. If they do want to use a credit card to earn rewards, they should make the payment the same day they spend the money so they are not risking having to pay high interest rates.
Stick to a Budget
Setting a budget and sticking to it ensures a person has money to pay for the basics — rent/mortgage, utilities, food, etc. — but it also gives the person leeway to have some discretionary spending. Once the basics are covered, some extra money can go toward discretionary spending as long as the person stays aware of how it fits into the budget.
Have an Emergency Fund
Life always will through curveballs that disrupt a person’s ability to live within their budget. The car always will need new tires or break down at just the wrong moment. The furnace will break down on a cold night. Out of nowhere, a person will get laid off or have their hours cut. An emergency fund will allow a person to weather those storms. Experts recommend an emergency fund of six months worth of wages to withstand these problems.
Prioritize Needs over Wants
Part of sticking to the budget will ensure a person prioritizes needs over wants, but even with that discretionary income, sometimes the needs still must take priority. Getting a new winter coat may become a need over a new purse. Stocking an emergency fund certainly takes priority over a new surround-sound stereo system. A good rule of thumb on controlling wants is to wait 24 hours before making any purchase over $100. This ensures a family can take time to discuss the purchase or an individual at least has time to decide if the purchase truly is a need.
Save for Major Purchases
A car will not last forever. New energy-efficient windows will save money in the long run. Knowing these facts allows a person to plan for their replacement. Rather than taking on debt to finance major purchases, saving for two or three years allows for a cash purchase that avoids debt.
Reduce Monthly Subscriptions
Does a person really order and save enough from Amazon to pay for Prime? Can a streaming service meet a family’s TV needs without paying for cable? Does that family really need three streaming service subscriptions? Monthly subscriptions seem to pile up over time, as people sign up for a subscription free for 30 days or at $4.99 per month, but then don’t cancel the services as the rates go up. Suddenly, a family could be spending $50, $60, or $150 a month on subscriptions they don’t really use.
Take Advantage of Coupons
Clipping coupons doesn’t mean a person shows up at the grocery store with an envelope full of little slips of paper, though that certainly still is an option. Shoppers can clip electronic coupons from their favorite retailers or sign up for online services such as Rakuten (formerly Ebates) to get refunds on online purchases. This allows the person to save on necessities (food) and desires (big-screen TV).
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