Getting out of debt is similar to losing weight. You set big goals, desired deadlines, develop action plans, and then put in all the hard work and necessary steps to crush your mission.

But once you’re victorious, you actually realize the hardest part is yet to come! If you’re not careful, you could easily slip back into bad habits, leading you right back to where you began. Staying out of debt and keeping weight off as you continue to move forward requires a whole new set of skills and a fresh game plan.

In this article we’re going to tackle concepts like lifestyle inflation, expectations, accountability, and other practices that will allow us to kick debt to the curb once and for all.

How to keep yourself out of debt

I know many people who have amazing debt-free stories. I’m talking about people who have eliminated $100,000+ of consumer debt. I ask them all the same thing – “Now that you’ve paid off all that debt, how do you STAY out of debt moving forward?” And the answer is always – “That’s a really good question!”

And there you have the reason for this post! In an effort to avoid debt all together in the future, we’ve developed a top 10 list to help put you in the right frame of mind. 

1. Evaluate Your Past (and learn from those mistakes)

Sometimes the best answers to future problems lie in past experiences. To avoid debt in the future it’s important to reflect upon what led you into debt in the first place. There might be some underlying behaviors that you’re not aware of. Don’t leave them unexamined!

Was it something random like a medical bill from an accident that served as a one-time incident? If so, then a simple solution is to have cash on hand, like an emergency fund. Or maybe your past debt is from mindless spending, and you need to brush up on some good financial habits.

As painful as it might be, looking back into your past and confronting those old demons is a great first step to staying out of debt.

2. Build an Emergency Fund

Having savings readily available provides an incredibly tangible benefit. I’ve always viewed an emergency fund as insurance against debt. The number we think you should be working towards is a minimum threshold savings amount of $2,467. Hopefully, you’ll grow it even bigger than that, but creating that initial buffer is crucial.

Emergency funds also come with some significant psychological benefits. Having the peace of mind and the ability to tackle any emergency will diminish the stress and anxiety you feel when you think about your finances. You’ll be able to sleep better at night!

We wrote an amazing post with everything you need to know about emergency funds. Check it out and build yourself that savings buffer! It will most definitely help you stay out of debt.

3. Avoid Lifestyle Inflation

Do you have a spending problem? Be honest…knowing the source of your debt troubles will help diagnose the actions that you should take to prevent that problem from attacking your liquidity and financial security again in the future.

A crucial component to avoiding debt is to tamp down lifestyle inflation. The less stuff you’re jonesing to buy, the more intact your finances are going to be. This might sound weird, but you’ll be less inclined to take on debt if you have lower expectations. 

4. Lower Your Lifestyle Expectations

I know that sounds odd to try and lower your expectations. And it’s certainly counter to the consumption-based economy we live in. But there’s real power in having lower expectations. 

For instance, if you work out three times a week but your expectation is to work out twice, you’re happy. But if you were expecting to work out five days a week, then you’re probably unhappy.

Lifestyle inflation is similar. If we can change our expectations we’ll find that we can easily be happier with less. That makes it less painful to say no more frequently, which is key to keeping you out of debt. You may have also heard folks refer to this as the value of contentment.

5. Use Stress to Your Advantage

Of course, too much stress can be a bad thing. But did you know that there is also such a thing as positive stress

Feeling financial stress is an excellent indicator of money woes that need to be addressed. When you’re anxious about a certain money issue, it’s a clue that this aspect of your finances could use some attention. Knowing the problem is half the battle!

Think about some of your biggest money fears and moments of stress. Then develop some action plans to address them! Tackling those things head on will make sure you’re not avoiding stress and then using debt as a last-minute resort to solve problems. Here are a couple posts to help think this through:

6. Avoid Spending Triggers

Another practical way to stay out of debt is identifying and removing triggers that cause you to spend. The key is avoiding temptation and not putting yourself in a compromising situation in the first place.

For example, it’s easier to say no to eating ice cream if you don’t have any in the freezer. It’s more difficult to resist when it’s just 10 feet away. That’s why people always say, “Never go grocery shopping on an empty stomach.”

You might need to start using Instagram and TikTok less if those are the platforms that lure you to spend. Or maybe you should unsubscribe from your favorite retailer’s emails. Determine where temptation sets in for you and actively work to avoid those situations moving forward.

Related: 14 Ways to Practice Mindful Spending

7. Stick to Cash and Debit Cards

If credit cards have been a problem for you, going all cash might be what you need to prevent overspending. Debit cards won’t allow you to buy things if you don’t have the money to cover it in the bank (assuming you don’t have overdraft options at your disposal).

If you want to continue to use plastic, make a point to write down every purchase. Consider it a money-spending journal! Keep track of every expense and your remaining balance to ensure you don’t spend more than you have.

Be honest with yourself. If you struggle with credit cards and can’t use them without going overboard, ban them from your life!

8. Create Lists to Keep Spending in Check

When grocery shopping, it’s easy to toss random things into your cart if you go to the store without a plan. A $6 box of sugary cereal? Why not! Might as well throw in a few bags of chips, too. But this can lead to accidentally overspending and landing right back into debt problems.

Lists and checklists are an excellent way to make sure that you’re able to stay focused on the task at hand. Not only do they help you put the blinders on, but they’ll also make sure that you get everything you need and avoid another trip back to the store.

Lists work! It doesn’t have to be fancy. Even the basic reminder apps on your cell phone can help you stay on track.

Related: Read The Checklist Manifesto. It’s an awesome book that will change the way you organize tasks.

9. Build up Disciplines and Habits

Regarding physical fitness, eating more veggies and going for more runs are tangible steps you can take if you’re trying to live a healthier life. Easy, right? Well, just because something is simple doesn’t mean that it is easy to do.

The same thing is true with our finances. Simply put, spend less money than you make and invest the rest—that’s how you build wealth.

Building healthy financial habits allows you to not spend every waking second worrying about money. Having a routine allows you to coast on autopilot, getting closer and closer to your personal finance goals. It takes patience as you work and build up the disciplines in your financial life.

One last note: Don’t expect to turn your spending around on day one, and don’t be too hard on yourself when you make a mistake. It happens to all of us. Habits take time to build!

10. Boost Your Earnings

There are only so many expenses you can cut. You still have to eat! Not to mention needing transportation and housing. If you’ve reached a point of reducing as many unnecessary costs as possible and still find yourself in a situation where you are living above your means, now is the time to work to increase your income.

Think about what skill sets you possess as well as where your passions align and begin researching potential part-time jobs, freelance or gig work, etc. There are a lot of great websites that you can probe for opportunities to boost your earnings.

Pro tip: FlexJobs is a great place to start!

The Bottom Line:

The best way to stay out of debt is to not accrue any to begin with! For most folks that means planning ahead. You’re probably not thinking about Christmas or holiday gifts yet, but you should be baking the dollars you want to spend into your budget and holiday savings plan now.

The biggest problem with debt isn’t the fact that we want new stuff. The real crime is paying exorbitant interest to finance that new stuff. It’s no bueno. Not being able to pay for it in full means you’re paying more for everything you buy.

The average person who has a revolving credit card balance of $6,000 is paying the credit card companies over $1,000 each year in interest! Think of all the other good that money could be doing for you. Utilizing debt for everyday purchases means that you’re overpaying for every single thing you purchase.

Following these 10 steps should help put you in a better position to avoid debt all together.

Related posts:

Beer tasting notes:

While talking about how to stay out of debt we enjoyed an Empress Rising Mole by Birds Fly South! And please help us to spread the word by letting friends and family know about How to Money! Hit the share button, subscribe if you’re not already a regular listener, and give us a quick review in Apple Podcasts or wherever you get your podcasts. Help us to change the conversation around personal finance and get more people doing smart things with their money!

Best friends out!

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