How to Stay Out of Debt

- - Getting out of debt


Ways to Stay Out of Debt

This weeks post was inspired by a reader question that was sent in a few weeks ago:

“How do I stop going through the same cycle of dedicating every dime to paying off bills, almost get them paid off only to have to do it again?”

In other words, how can you get out of debt once and for all?

The first thing jumped out at me was to start saving in an emergency fund. If you already have one, it might be time to increase how much you are saving.

Emergency Funds and Staying Out of Debt

An emergency fund, or rainy day fund, is a specific amount of money you have set aside for times when emergencies strike. We all know that life doesn’t always go as planned, so having money saved for these moments is a great idea.

This separate stash of money allows you to worry less about unforeseen medical expenses or car troubles. However, it should be used, as the name implies, for emergencies only. This is not the “oops I spent my entire budget, and I need to go out tonight” fund. There has to be some level of ____ on your part to make sure it is used properly.

How much to save in an emergency fund is typically the golden question…which of course doesn’t have a one-size-fits-all answer.

If you have a newer car (or don’t have a car), have zero kids, and are generally pretty healthy, $1,500 might be enough to have set aside. If you have 3 young kids, an unstable job, and own your home, you might want to save 6-8 months of expenses in case something were to happen.

I like to save my emergency fund in a bank apart from my checking account. For instance, I have my checking account with Capital One 360, and my main savings with Ally. It typically takes at least a few days to get money from one bank to another.

This ensures that I’ll need to wait at least 48 hours before I have that money in my account – I can’t make a stupid decision one day and regret it the next. Even if I make the transfer, this process forces me to “sleep on it.”

Since paying off debt typically takes quite a few months/years to accomplish, I would definitely suggest saving your emergency fund money before you start throwing all of your money towards debt repayment. If you don’t have this fund set up first, you are much more likely to put yourself into more debt inadvertently.

The more realistic, and honest you are about how much money you need to save before paying off debt, your likelihood of staying out of debt increases.

Goodbye Excuses

Aside from setting up a solid plan for your money, you also need to be very in tune with your mindset about money. You want to be 100% honest with yourself about how you are spending your money.

I struggled with this a lot, and still do. It’s hard to admit that the $150 you spent on Amazon was completely out of line when you’re running low of funds. I always find excuses as to why I needed to spend that money. Instead of wasting time coming up with excuses, I have to remember that I’m the only one who struggles when I lie to myself.

Admit that you made a mistake, then accept it and move forward. Remind yourself of why you are motivated to get out of debt in the first place, and move on.

Change It

Every time I make a mistake like this, I try to think of ways to make it less likely for this to happen again. Set the background image on your phone to something motivational, something that reminds you of WHY you are on this journey in the first place.

Set Google calendar reminders every so often to check in and see how you feel. It’s practically impossible to hustle through debt repayment without feeling lonely or “deprived.” Take a few minutes every so often to write down how you’re feeling. Reflect on that and see if there are deeper issues lying below the “boredom” and loneliness.

If you find yourself continually going back into debt over and over again, it could be a matter of saving more in your emergency fund, or it could be something deeper.

Are you willing to allow yourself to no longer be “normal” and actually succeed at being debt free? Are you truly trying to reach this goal, or are you scared to break free from the comfort of relying on credit cards and other people’s money to get by?

I’m not just saying this, a lot of people are scared of success – that’s okay. But you have to recognize it or it will never change and you could end up in this “debt-loop” forever. 

Perfect Teaches You Nothing

Lastly, you have to understand that life isn’t perfect. You will stumble, you will fall. You might even break a leg along the way. These moments of stress and anger will teach you something new about how to prepare for the next leg of this journey. Embrace them.

If you would like your question answered on the blog, send it on over to [email protected] or submit it via our “Ask a Question” page here.

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I am Chenell Tull and so far, I've had a pretty rough time with my student loan debt. Recently, I've figured out a more productive "get out of debt" plan and the goal is to pay off over $60k in just 36 months. If you want to learn more, subscribe to the mailing list and get FREE updates on my successes and failures on this journey out of debt.