8 Painless Tricks To Avoid Debt Forever

how to avoid debtIf you want to experience financial independence or live the life of your dreams, you are going to have to avoid going into debt. Put simply, when you are in debt, you are working for someone else. Every dollar you earn is done so to pay someone else to satisfy your debt.

As a result, you can never reach your goal of financial independence when you are saddled with debt. The key then is to avoid debt altogether.

But this can be tough. Advertisers are good at getting us to spend our money, even when we don’t have any. Add in peer pressure and our personal beliefs about wealth and most of us end up in debt.

But there is hope. This post is going to outline ways for how to avoid debt so that you can make sure your money is working for you and not working against you.

How To Avoid Debt: 8 Strategies

#1. Live Within Your Means

The most important way for how to avoid debt is to live within your means. This means that if you don’t have the money for something, then you can’t afford it and shouldn’t buy it. This is harder than it seems since our society has become an instant gratification one. Everyone needs to have things now and can’t put off buying things.

Add to this advertisers who are able to tap into our emotions to get us to buy and it’s no wonder why so many of us are in debt.

Just how do advertisers get us to spend our money? They know that the emotional side of our brain works faster than the rational side. So they tap into our emotions and we buy. When you have buyer’s remorse a few days or weeks later, the rational side of your brain has caught up and you realize you don’t need or want the item.

Unfortunately, it is too late as we have already bought the item. But you can beat advertisers at this game.

Here are a few games I like to play to help me overcome the urge of buying things in the moment.

  • The Waiting Game: When you have the urge to buy something, take note of it and wait a week or so to see if you still want it. In many cases you will find that you don’t want it any longer.
  • The Pause Game: Similar to the waiting game above, just take a few minutes instead of a week. Give yourself just a few minutes to think things through. This doesn’t work as well as the waiting game, but will help to curb some of your spending.
  • The Stranger Game: With this game, imagine someone was standing in front of you. In one hand is the item you want. In their other hand is the cash that the item costs. Which would you rather have, the item or the cash? If you choose the cash or even hesitate, this is your sign to not buy the item.
  • The Right Now Game: This game has you ask yourself a question. If you could use the item right this moment, would you? It works best for clothing in that would you wear this item right now? If you answer no, then odds are you don’t need it and shouldn’t buy it.

The key ingredient in all of these games is to get you to stop and think. The more you can do this, the less money you will spend on a whim.

And what if you do still want the item? If you don’t have the money to buy it right now, then you know you need to save up for it. It might not seem fun to put off buying things until you have the money, but it will make you appreciate the things you have so much more.

#2. Set Up A Budget

By analyzing your spending and knowing how much you have to spend will go a long way in helping you to avoid debt. There are three ways for you to track your spending.

  • Excel Spreadsheets: This is a manual process, but is great for those that like the hands-on approach. You can check out this post for 10 free spreadsheets to download.
  • Tiller: Similar to excel spreadsheets, Tiller works off of a Google Sheet. It is still spreadsheet based, but it automates most of the process. You can completely customize the sheet for your liking and still automate 99% of the budgeting. You can learn more here.
  • Personal Capital: If you want to fully automate your budgeting, there is Personal Capital. This free app will allow you to set up specific categories to track and will update automatically for you every day. You can learn more here.

Take some time to figure out which solution is best for you and your needs.

I know that some of you might see the word budget and get nervous. A budget isn’t restricting your spending. It is helping you to spend your money in a way that makes you happiest.

Right now, you are probably just spending money on things thinking they bring you happiness. In reality they don’t, which is why you are spending money on so many random things.

By budgeting, you learn what you value and spend your money there. You enjoy life now and still make progress towards reaching your goals.

But what if you really don’t want to budget?

Sit down with a pen and paper and make two columns. In the first column, write down all of your expenses that are absolutely necessary, such as food and shelter costs. In the second column, write down all of your other expenses, such as entertainment and gadgets.

Start to track your spending in your non-necessary column as these expenses are what tend to get us into the most trouble.

#3. Be Happy

If you want to know how to avoid debt, the answer is to be happy. If you are depressed or bored, odds are you are going to frivolously spend money. Take me for example.

After I graduated college, I got depressed and started spending money to make me happy. Buying things provided me a temporary high. Unfortunately, it wore off quickly, forcing me to buy more and more things.

It wasn’t until I understood myself and began to take better care of my emotions that I was able to overcome my bad spending habits.

So you need to take a little bit of time and figure out what makes you happiest. For a great read to help you think about this, check out this post.

You should also look over your budget to help you remember and see how you have spent your money. When reviewing your expenses, think about which ones made you happy, not just at the time when you bought the item, but now too.

You want to find the things to spend money on that will bring long term happiness to you.

#4. Don’t Buy Love

This way for how to avoid debt is related to the above point about being happy. You need to love yourself and value yourself. There are some people that think they need to buy things for others in order to be loved. Any person worth loving doesn’t need you to buy them things for them to love you. They will love you for just being you.

When I was in college, I learned this the hard way. I bought things for my then girlfriend because I thought that buying her things was how I showed her I loved her. The truth is, I didn’t need to buy her a thing to show her I loved her.

Learn to love yourself because you are special and understand that others will love you for this reason as well. It may take some time for you to raise your self esteem, but it can be done.

Here are a couple of books I enjoyed reading to help me on my journey to be a better person.

#5. Don’t Compare Yourself To Others

I’m sure you’ve heard the saying, “don’t keep up with the Joneses”. That statement is 100% accurate. Trying to keep up with others is pointless. Learn to love what you have and as I mentioned above, live within your means.

In fact, the Joneses who have all of that stuff, are most likely in mountains of debt themselves. Don’t believe me? I encourage you to read The Millionaire Next Door.

It will open your eyes as to how the majority of the rich live. You won’t spot the typical millionaire. He or she will look like just an average person. The person you see that looks like a millionaire is probably farther away from millionaire status than you when you take into account all of their debt.

I learned this through my last job working for the rich. They are just regular people that you would never know are worth multi-millions of dollars.

Don’t let people tell you what to buy, how to live and where to spend your money. By listening to others, you are guaranteed to get yourself into debt. Make these decisions for yourself.

#6. Learn That Credit Cards Don’t Make You An Adult

After you graduate and enter the workforce full time you’re a golden child to financial institutions. You’re credit score is most likely good and you have a new found income stream, both are stellar characteristics in the eyes of a lender.

Soon enough you’ll be receiving credit card offers in the mail with bonus rewards points, travel perks and cash back offers. Don’t accept them all, or else you will quickly find yourself in a mountain of debt.

Decide which offer is most appealing, accept it and throw away all the rest. Having several credit cards doesn’t make you financially responsible. In fact just the opposite is true.

Being a responsible adult means knowing your limitations and spending within your means. It’s not about having the most credit cards or the highest limits possible.

So if you choose to use credit cards, limit the number of cards and use it wisely.

#7. Use Cash Instead Of Credit Cards

On the flip side of the point above, paying with credit cards may be very convenient, but it’s the easiest way to rack up debt. This is how people end up maxing out their credit card every month.

When paying with cash you will only spend what you have. This will save you from having to pay interest on your credit cards if you don’t pay the balance in full by the end of the month.

To avoid debt, carry your credit card only for larger purchases that you want the added protection that you get when buying on credit.

Otherwise, use cash for your purchases.

#8. Use Your Credit Card Like A Debit Card

The main difference between a credit card and a debit card is that with a credit card, you typically have 30 days until you have to make a payment. With a debit card, the money you spend is taken from your checking account right away. By using a debit card, you avoid debt.

If you want to use your credit card to earn cash back, but want to avoid getting into debt, then the simple solution is Debitize. This free service lets you use your credit card and earn the cash back or rewards, but will see your purchases and move the money from your checking account to a Debitize account. When your bill is due, Debitize will pay your bill for you and will pay it off in full!

By using them, you avoid debt and earn the rewards you want! You can click here to learn more about Debitize.

Final Thoughts

The overwhelming theme for how to avoid debt is to love yourself, learn to not compare yourself with others and to stay away from credit cards. If you can learn to do these things, you will be well on your way to avoiding debt.

And the sooner you start avoiding debt, the sooner you can start growing your wealth and getting ahead financially.

But what if you already have debt? Learn how to pay off your debt quickly so you can get ahead financially and don’t have the weight and stress that comes from being in debt any longer.

24 thoughts on “8 Painless Tricks To Avoid Debt Forever”

  1. MITM @ Nakedbudgeting

    I love that you are focusing on character traits rather than behaviors or outcomes. It is truly the start of everything else.

  2. Great thoughts here Jon! Sadly, most don’t live within their means or have confused (rationalized) themselves into thinking they are. If you don’t have it, you shouldn’t spend it. It should be as simple as that.

    1. When I was younger I would “think” I was living within my means, but then I would get my credit card bill and realize I wasn’t. I had to learn how to live within my means all over again.

  3. Except for a year and a half long jaunt with a car loan, I’ve been able to avoid debt except for the mortgage. Though I have to admit that I do consider the mortgage a bad debt.

    1. Great job. Sometimes, some debt is unavoidable. The key is keeping it in check and then working to get rid of it.

  4. Great post! Definitely live within your means. Just because someone else is buying tons of expensive things does not mean that you should be too, even if you think you “deserve” it more than they do.

  5. Excellent tips! Spending less than you earn is incredibly important. It is so hard for many people to figure out, but totally possible. One of the wealthiest people I’ve ever met still drives a 1980s Toyota Corolla because it still works. He doesn’t care about the millions in the bank, it just isn’t practical to get the new car for him. A great example of living within your means.

    1. I know a few people that are wealthy but you wouldn’t know it by looking at them. They dress and act like they are just average when they have millions.

  6. The First Million is the Hardest

    It’s really as simple as spending less than you earn. Unfortunately it doesn’t always happen for people, but if you make that your focus you should be able to avoid debt barring unforeseen circumstances.

    1. That is why I like to save first with auto transfers to savings. This allows me to spend everything left in my checking account. If I were to do it the other way around, I would spend everything and save nothing.

  7. My actions reflect what I believe. When I write down the goals that are most important to me to achieve and ask how I’ll feel if I don’t achieve them, I’m taking the first step of bring my future into my present. When I’m tempted to make a spontaneous purchase, I ask myself if this purchase is worth postponing my future goal. This takes away the feeling that budgeting is preventing me from enjoying life. This also gives me the freedom to search for and use budgeting tools that will best suit my style. The best part is I’m no longer forcing myself into doing something I know I should do. I’m doing what I want to do to get where I want to be.

    Debt isn’t bad. It’s how we’re using debt that’s the problem. Using debt to purchase an appreciating asset is smart. Most of us use debt to purchase ‘stuff’ that is declining in value.

    Banks use our checking and savings deposits as security to borrow anywhere from two to thirty times the value of our deposits. They either invest or lend what they borrow and we’re paid .1 percent at best. What a great revenue model!

    Instead of leaving our dollars sitting in our checking account, we need to keep our dollars working 24/7.

    1. I do this a lot myself. I ask myself if buying this will get me closer or further away from my goals. If it takes me further away, I avoid it.

  8. Good thoughts here Jon! There are many ways to avoid debt, but I think so much of it comes down to living within your means and not comparing yourself to others. The problem that happens when you’re not doing the former and doing the latter is that you begin to become discontent and spend money you just shouldn’t be spending. When you don’t recognize that then you’re spending can get out of whack which will then lead to debt.

  9. Well….we live within our means…now. We didn’t always and have fallen victim to unhappiness and comparison making purchases….. We started to “punish” ourselves for it, but that lead to more unhappiness and negative thinking. Staying positive and seeing a silver lining has helped us most frequently.

    1. I think happiness definitely comes from within. Buying things will never make you happy long term. Short term yes, but never long term.

  10. This is a great post Jon! You provided good ways on how to avoid debts. I will personally practice it especially the first one that you indicated.

    Those are the ones that we should do not just for the financial area of our lives but also for the other areas of our lives.

    Thank you so much and may you have a prosperous and happy 2014! 🙂

  11. I especially like these 2: don’t buy love, and don’t compare to others. Very true, as using money as a tool to influence others, gain standing in a peer group, or feel good about ourselves vs. others are all a waste of precious resources. As in money, but also time and energy.

    1. I learned these lessons the hard way but am thankful that I learned them early on in life and was able to overcome them.

  12. These are some great tips to avoid debt. All too often there is something wrong with ourselves that causes us to spend a lot of extra money to correct. I think you hit the nail on the head with many of these tips. I especially like tip #5 – don’t compare yourself with others. This one almost got me into a ton of trouble a couple years back where I came super close to buying a sports car for nearly $80K!

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