Tips for Living Completely Debt Free

In order to live debt free, you must spend less than you earn. Sounds simple, right? Unfortunately, for many people, living debt free is anything but simple. Consumerism is rampant in our society, and credit is all too easy to come by. The real estate bubble has caused people to lose home equity at an alarming rate, and foreclosures are on the rise. However, it is still possible, even in these hard times, to live debt free. Here are a few tips to help you spend less and live a debt free lifestyle.

Budgeting and Saving
Whether you're in debt or not, you must pay yourself first. If you truly can't afford to save a dime or you're sinking deeper into debt each month, ask yourself where your money is going. You are probably living above your means, and you need to make some lifestyle changes, which may not be fun. Take a look at your budget, and see how much extra money you'd have if you cut cable, eating out and going to the movies. Then see how much you'd save if you had a roommate and drove a cheaper car. Lifestyle adjustments like those may be necessary for you get or stay debt free.

Student Loans
Unfortunately, many of us start out our adult lives already deep in debt, in the form of student loans. Education is a wonderful thing, and I believe it's something for which it's worth going into debt. However, if you plan to use loans to fund your education, make sure you're learning something which will enable you to get a job with a good enough salary to pay them back. $50K of debt for a degree in underwater basket weaving probably isn't a smart choice. Working your way through school is a smart option, too.

Credit Cards
Many people get into trouble with credit cards at the same time they're racking up student loan debt. The solution? Just say no. If you cannot control your credit card spending, simply cut up the cards and don't apply for new ones. No access to credit = no debt! To get rid of existing credit card debt, stop charging and start using every available penny to pay down those balances. Call the card companies and ask for interest rate reductions every few months, too - most lenders will allow this, especially if you have a good history of on time payments.

Mortgage Debt
Here's another type of debt that is worthwhile if you're smart about it. Home ownership can be very rewarding, both from a personal and a financial standpoint. However, when buying a home you must be careful to choose the home and mortgage product that are right for you. Loans with variable rates can skyrocket overnight, making your previously affordable mortgage outrageously expensive. Keep your credit score up so you qualify for the best terms and the lowest interest rates.

Home Equity Loans
Another way homeowners can get into trouble. These loans can be great if used wisely, but too many people are pulling equity out of their home to make lifestyle improvements that they simply can't afford. Don't make that mistake. Use your home equity only to do necessary home repairs, and even then only if you can't save the cash.

Car Loans
Financing a car you can't afford is a perfect way to find yourself in debt you'll never get out of. Just because you can afford the monthly payment does NOT mean you can afford the car - car dealers will stretch a loan to make the payments look affordable. Don't be like my brother, who recently bought a $25K car - on a $25K yearly salary. Unless he hits the lotto, he's going to be a slave to that car payment for the next seven years. Pay in cash if possible, even if it means driving a beater.

Going Green
Reducing your carbon footprint is a great way to save money. Reducing your utility bill will leave you more money at the end of the month to throw at those credit cards. Be diligent about recycling deposit bottles, too - those nickels and dimes really add up! Also, instead of buying new, why not see if someone else has what you need? Websites like Freecycle and Craigslist are a great place to buy necessities like furniture or clothing for pennies.

Shopping
Speaking of clothing, do you really need a new wardrobe every season? Shopping has become an intrinsic part of our lifestyle and most of us have far more than we'll ever need. I went to Europe for a month this summer, and I took the bare minimum of clothing I thought I could get away with - less than 1/3 of my summer wardrobe. Guess what - I didn't even need all that I had brought. Make do with what you have for a season or two, and stay debt free.

Leisure
To many of us, leisure time means spending money on meals out, movies, sporting events, bars, etc. Now, there's nothing wrong with catching a show now and again, but there are plenty of fun activities that don't cost a dime. If you're in debt, you need to focus on free entertainment while you strive to become debt free.

Food
Grocery costs are on the rise, but it is still possible to eat well for very little. Shop sales, eat less pre-packaged food, and eat out less. You may also get some health benefits from this approach!

Transportation
Public transportation is an ideal way to save money, not everyone has access. Everyone can drive less, though. With gas prices through the roof, driving as little as possible is a great way to keep your money in your bank account. Combine trips and carpool whenever possible.

Getting out of debt may not sound like a lot of fun, but the peace of mind that comes from living a debt free lifestyle is priceless. By making some lifestyle adjustments, you can become debt free and build a secure financial foundation for your future. Nothing you can buy with a credit card will ever make you feel better than that.