Becoming debt-free and staying debt-free; Top Tips

I’m a big fan of the debt-free forum. I may not post much on it but I like reading it. I think it should be called debt-free wannabe and staying debt-free as all the advice given here can be applied to those of us who don’t have debts as well.

I was making my revised budget like I do every month and I thought I would start a thread for top tips for becoming and staying debt-free.

Obviously the tips posted here are what works for each of us (please join in) and may not work for all of us but it may inspire you.

My top tips are as follows:

1. Budget/Plan. Spend time carefully budgeting and do it on different scales. Have a yearly, monthly, weekly and if you are really anal, daily budget. The different scales help you see the big picture and the finer details. I find my yearly budget gives me perspective and I don’t get down when a minor set-back happens because the bigger picture will swallow it up. The smaller-scale budgets help me focus, identify areas where I can cut-back, and is where I save the most. If something is not making sense in your budget or you cannot see how to cut back, take a different view of it.
2. Review and Revise. Don’t create a yearly-monthly-weekly budget in January and try and stick to it for the whole year. Circumstances change, your own life and the world around you. What is right for you now might not be in two months. If you are in the wrong budget, it’s not going to work; you are going to feel bad that you cannot work with the budget and more likely to give up. Remember simple things like gaining/losing a pet, your car getting older and needing more work/becoming less efficient, your children going through a growth spurt and eating you out of house and home will have an affect on your budget. Even if you think nothing has changed always look at your budget and see what is going on as chances are your original budget may not have been as accurate as you thought. You may be consistently going over your grocery budget even when being careful but spending less on clothes than you thought. Moving some of the clothing budget to groceries doesn’t actually change how much you spend but will make you feel better within yourself as you are making your budget work.
3. Avoid all or nothing situations. Many people fall in the trap of spending all their money in the first couple of weeks of the month and then living on very little. It is tempting but I have found this approach is bad for you mentally and you actually end up spending more than if you took the consistent spending with occasional treats approach. If you can spend a week living on very little it means you can do it, now just try this on a less extreme scale but being consistent and planning your treats. This can sometimes end up with people budgeting weekly and going under their budget one week and going crazy the next week. This is actually very similar to spending all your money in the first two weeks and living on nothing. Instead of just spending the money you saved think about it, maybe save half and treat yourself with half. Don’t just fall into the trap of thinking I‘m under budget that means I have to spend the excess money. It may also be a sign that your budget is too generous and you could be cutting back more.
4. Time is money. Some of you may not like this one as you may think I’m encouraging people to not be moneysaving but it is just pointing out that time is money and you could give a quick thought to this before doing something. For example, Fred is buying a new toaster. Fred knows the specific toaster he wants. Within about 15 minutes of net surfing he finds what he wants and it’s 30% cheaper than normal price. He may not have got the cheapest price for that toaster; he could stalk ebay looking for one, check shops that may not be in price comparison sites, go to the high-street and look for a ex-display item, calculate the quidco cashback for each site he’s considering to see which is the best and 4 hours have gone by and at the end of it he has saved himself another £4 which is excellent. Alternatively, if Fred had spent 15 minutes with the original plan, did two hours of overtime in work earning £20 after tax, he would have 1 3/4hr left to have fun and have £16 more. This is a very simple example, I know not everyone can pick up extra hours at work but the point is you could maybe spend the extra hours doing something else, revising your budget, listing items on ebay, working etc. While moneysaving is fantastic and I encourage us all to be part of this sometimes it can be too much if you are spending hours saving only a few pounds when you could earn than in a lot less time or use your time in a better way. Obviously if you are buying a high-value item you could save a lot more than £4 so it would be worthwhile spending longer. It’s a fine line but just think about the time vs. money thing next time. One other point is I know many people get great pleasure in saving the extra £4 and for them the 4hrs of ebay stalking doesn’t just save them money but provides them with entertainment and fun and that’s Okay, I say stick with it. I have a friend who walked 2 miles (4 there and back) to a shop because he knew he could get an item 50p cheaper than the shop at the end of the street. The time and effort spent saving that 50p was worth it for him for the sense of achievement, fun or whatever it was (this approach is not for him). The idea is to make you think about how you use your time and resources and that there may be better ways of moneysaving than the obvious.
5. Getting a bargain is not always moneysaving. Many people get sucked into the false sense of achievement created by, “I could buy X and save 30% right now”. Yes, you would be saving 30% but do you really need X, would you be buying X if it wasn’t 30% off? If the answer is no to either of these it is not moneysaving it is wasting money and the worst thing is you think you are saving money. People think the best way to save money is to get a bargain; the best way is to not buy it in the first place. I feel people often forget this fact when blinded by discounts and the act of getting a bargain.
6. What works for you? What works for Fred may not work for you. Take peoples’ tips, use them, ignore them or convert them into something you can use. If is doesn’t work it is not a failure; it is just not for you. It is important to minimise feeling bad about money as this is when mistakes happen.
7. Mistakes happen. You gave into temptation and bought that new toaster because it was 30% off even though your old one could have made it through another year. Don’t give yourself too hard a time about it; learn from your mistake. If something like this happens, look at all the good things you’ve done, look at the big picture, make yourself feel better about your situation. If you make yourself feel bad about it you are more likely to give up which is a lot worse. Word of warning about this; avoid using the “we all make mistakes” line as an excuse to waste money. Making a silly purchase every so often is Okay but if you are doing this every week then there is a bigger problem.
8. Snowballing works both ways. We’ve all seen the snowball calculator and how just throwing an extra bit of cash at debts each month can drastically reduce it. Same works the other way for getting into debt. Those trips to the coffee house each week may seem like small items individually but when then add up it can be big. This is the kind of thing you work out what it costs you a week, then monthly and then yearly and it’s the yearly big picture that normally shocks people into action.

That’s about all I can think off. Mine are a big longwinded but I wanted to give some detail since it was the fist post of the thread. Feel free to join in with as much or little information as you want. Maybe more specific tips like plan your meals for each week etc.

I’m stating the obvious with the tips but knowing these things and doing them are completely different. Hopefully, pointing them out will help people jump into action.

As I said before these work for me or people I know, please don’t take offence at them if they go against how you save money or if you think they are silly.

Happy Moneysaving