Happy New Year, folks!
It’s this time of the year again, and some of us are into making (and trying to stick to) that list again. I’ve seen Facebook posts of friends listing their New Year’s resolutions on my feed, hoping they stick to it this time around, and of course – followed by posts of their new gadgets and latest basketball shoes ;). On the top of that list? Having a debt free life. Why not? If you cannot have a life living on truckloads of cash, at least have a debt free life, eh?
I can confidently say that I am living a debt free life (with some cash stashed in the bank and some forms of investments as well). I abide by some SIMPLE but GUARANTEED rules which help me live a simple life and avoid the debt ridden situation, and also avoid that nasty (not to mention embarrassing) debt collector, if you know what I mean:
1. LIVE WITHIN YOUR MEANS. Period.
2. DO NOT EVER make credit card purchases in which you do not have an equivalent cash amount in hand to pay for. Seriously, guys. If in case you are doing this (ehem, you know who you are), this could be the start of something that will be devastating on your financial end. I personally do not make credit card purchases which I know I do not have money in hand to pay for. Do not even start having that “I’m having that payslip/huge bonus next month anyway” kind of thinking! Those people I know with that kind of thinking are the ones I know of who are struggling financially. You don’t even have the money, so why spend the money you don’t even have? Do you even know what delayed gratification means? Look it up.
3. Pay your bills on time. As an addition to number 1 above, paying your bills on time not only saves you from the inconveniences of late payments, it also saves you from late payment fees and other interests. Are you aware that these fees/interests have the nature of piling up with you ending up in bad debt? If you have this kind of ‘late payer’ attitude, chances are you’re already paying thousands of fees and interests without you even knowing it. In case you forget paying your credit card bills, you get more headache as you also get bad reputation from these companies. I personally ALWAYS pay my credit card on the same day I make the credit card payment (I’ve set up an online payment scheme, suggest you do the same as well so you can do so real time. Plus, this service from banks is free.). You might ask yourself, “Why have a credit card when you are defeating the purpose and benefit of buying now/paying later?”. My answer is, read item # 1. This is a simple and uncomplicated list I try to follow to avoid a debt free life, which is guaranteed. The only benefits I want from having a credit card are the points and airline miles I earn, and the freebies and discounts as well!
4. Have an emergency fund. In order for you to support yourself through items 1 and 2 above and to ensure that you stick to this list, set up your very own emergency fund. It could be in a box at the back of your closet or a separate savings account from your local bank, whatever. I am no hypocrite, I admit that sometimes it is very hard to follow my already very simple list. Thankfully, I was able to set up an emergency fund for the rainy days to ensure I stick to the golden rules written in this list. When I say ‘rainy days’ it meant you ran out of money to spend because you’ve already stashed your wad of cash in your savings account, lol. It could be worth two weeks to a month of your spending allowance, depends on your assessment of your lifestyle. Oh, and also make sure you do not touch your savings account as well (money in should never go out), since you already have your very own emergency fund. Congratulations!
5. Finally, do not ever put yourself in a debt ridden situation in the first place! Enjoy your life whilst living below your means! Trust me, it is better to live a debt free (and peaceful) life than having all the luxuries (just so you can post about them on Facebook) but not being able to sleep at night. Oh, the horror!
Following these 4 simple but guaranteed debt free steps will definitely save you from lots of headaches, irritating and embarrassing collectors, and sleepless nights. In my own experience, I’ve had people telling me that all their bonus money goes directly to their bills payment, and not a single cent goes to them. Sounds familiar? You don’t want to live that life, don’t you?
These rules are simple, just stick to that as part of your New Year’s resolution (and for all the years to come) and you’ll live a debt free life. Make sure you act now! Share this to your friends so we can spread the word, especially to those who you believe would need this advice.