The habit of staying debt free

Getting out of debt is a massive achievement in itself. Staying out of debt for good is a whole different matter.

It’s happened to me and I’ve seen it happen to other people. The situation I’m talking about is where people struggle for a couple of years and eventually manage to pay off their debts. The sense of freedom is overwhelming. Then after a while – it could be a couple of months or a couple of years the sense of release isn’t as strong. The positive afterglow of achieving debt freedom has faded significantly. Not only has the afterglow faded but the fear of debt has diminished. People forget how painful the debt was.

It’s at this point that the person is most vulnerable. It’s at this point that they are likely to be seduced back into the old habits of taking the monthly payment option. Hey its okay they think – just this one time. I can manage this small monthly payment.

From this small opening the floodgates of debt usually bust wide open.

This has happened to me and you keeping kidding yourself that things aren’t that bad and that you can manage. You had a debt problem before but you are different now you are more mature now and you can handle your finances better. Yeah right!

Reality hits home

This fantasy continues on for a while until one day you realize you’ve dug yourself another debt hole – bigger and more impressive than the last one. Does this spur people into a tornado of action to try to solve the problem? Nope – it’s at this point the “why me?” self abuse starts.

Emotions run high and the pressure to do something about this new debt is huge. However this time round it seems to take longer for any action to happen. It’s a case of “How could I have been so stupid?” The fear of judgement by friends and family about getting into debt again means that the debt problem goes hidden for longer.

Since the problem stays hidden for longer the problem gets harder to solve second time round. Added to this is the very human response of “You did it again?” which to me always meant that friends and family are a little bit less enthusiastic about helping you out the second time round.

Staying debt free

Becoming debt free is a massive task in itself. The journey to becoming debt free requires you to look at every aspect of your life. You begin to see how you exist in this world and you begin to better understand your motivations for doing certain things. It can be a real eye opener. At the same time it can be a huge internal struggle. The physical element of becoming debt free is relative easy and straightforward. The emotional element of becoming debt free is huge.

In order to stay out of debt once initial debt freedom has been achieved then the focus must be on the emotional side of the debt free equation.

The habit of staying debt free is not one single habit. The title of this post is a bit misleading but I did that on purpose. It is necessary to understand that the habit of staying debt free is made up of a multitude of individual thoughts, actions and habits.

That said there is one simple rule of thumb that will allow you to maintain the habit of being debt free and that is ‘spend less than you earn’. Dull boring advice – YAWN. Yet had I listen to it second time round my life would have been a whole lot easier.

By spending less that you earn I mean on a cash for cash basis. What this means is that if you earn $2500 net per month then you should be spending less than $2500 per month on all your expenses and outgoings. This includes paying off your credit card completely each month. Ideally when you are coming out of a debt situation using cash only is the best way forward.

A new financial goal is crucial

It’s easy to stay motivated when you have a goal to work towards. A lot of the time when people achieve their goal of debt freedom they rest on their laurels. They relish their new found freedom and rightly so. But some rest for too long and fail to set a new bigger financial goal.

Once debt free another financial goal is required if focus is to be maintained on their financial situation. This is where a bigger more challenging financial goal will make the difference between staying debt free and slipping back into debt. A big financial goal could be something like building up savings of $10,000 in a one year period. Again it will depend on your own personal situation.

Two simple but very effective ideas

In order to stay out of debt once you are debt free spend less than you earn and set yourself a big juicy financial goal. Simple as that…okay okay it’s not as simple as that. If it were then I wouldn’t have so much material to write about on debt. Deep down most of us know that in order to change our situation be it financial or otherwise we need to change our behavior. It is changing our behavior that is ultimately the hardest part of getting and staying out of debt.

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