7 Easy Ways to Stay Out of Debt

Worried man sitting at table with bills
Photo by wavebreakmedia / Shutterstock.com

It’s so easy to fall deeply into the abyss of debt. There are hot new toys to buy for your kids, and fancy new electronics to purchase for you and your spouse.

Then, there are the day-to-day expenses: Your rent or mortgage, groceries, insurance premiums, gasoline, cable and other bills.

But debt is not inevitable. To help you sidestep debt before it starts spiraling out of control, we’ve got these seven tips.

1. Know where you stand

Compute your household’s debt-to-income ratio by dividing total monthly debt payments by gross monthly income. This tells you what share of your income goes to debt payments each month. You want a low score.

Say your gross monthly income is $6,000, and each month you pay:

  • $1,500 for your mortgage
  • $200 for an auto loan
  • $300 toward credit card debt

Your monthly debt payments total $2,000. Divide $2,000 by $6,000, and you’ll discover that one-third of your gross income goes to debt payments.

The higher your debt-to-income ratio, the more likely you are to run into trouble making monthly payments.

2. Don’t try to keep up with the Joneses

The family next door gets a shiny new car every two years, and you just saw a 65-inch LED TV delivered there. Lately, the mom and daughter rave about their weekly mani-pedis.

They might be financially fine — or perhaps they are living beyond their means.

You don’t have to follow their footsteps. As Money Talks News founder Stacy Johnson has written, you can either look rich or be rich — you probably won’t live long enough to accomplish both. He explains in “The 10 Golden Rules of Becoming a Millionaire“:

“Diverting your investable cash into things like cars, clothing, vacations and houses you can’t afford will make you look rich now, but prevent you from actually becoming rich later.”

3. ‘Charge it’ less

When you pay with credit, you’re really borrowing money that has to be paid back. Let’s say you paid $899 for a tablet. If you don’t have the money in the bank to pay off that credit card bill by the end of the month, your purchase will end up costing you a lot more.

Charge $899 on a card with a 15 percent APR and a monthly minimum monthly payment of $20, and it will take you more than five years to pay for that tablet.

Here’s the toughest part to swallow: In that time, you will pay more than $400 in interest charges — meaning you have paid more than $1,300 for an $899 device.

4. Track your spending

Track your spending with free software designed for the task. Seeing where your money goes helps you spot unnecessary purchases and adjust your spending.

As we explain in “5 Reasons You’ll Never Get Out of Debt”:

“If you don’t know where your money is going or even how much you make monthly, you’ll never get out of debt. Every time you open your bank account, it will be a crapshoot whether there is money there.”

Keeping close tabs on bank balances also helps you avoid overdraft charges.

Looking for the right software to help you track your spending? Several folks at Money Talks News swear by You Need a Budget, also known as YNAB.

5. Plan your purchases

Save cash upfront for major purchases like that new TV or trip to Disney World.

That doesn’t mean you have to carry thousands in cash around in your wallet. Open a high-yield savings account for your anticipated purchases — not just for big-ticket items but also for big-expense times like Christmas and back-to-school shopping.

If you want to use credit cards to pay for the purchases and capture rewards they may offer, go ahead. But only do so if you have saved the money to pay off the splurge quickly. That will help keep your monthly bills down, your debt-to-income ratio at a reasonable level and your credit score up.

6. Adjust your spending

Life happens. That’s why you should be prepared with enough savings to pay living expenses for at least six months. Even with an emergency fund, you’ll probably need to cut back on spending if you get divorced, lose a job, or take unpaid leave to care for your spouse or parents.

Discuss the changing situation with your family to get support for spending adjustments. Even small purchases add up. Can you cut your cellphone plan, curtail your cable bill or forgo daily pumpkin spice lattes?

When grocery shopping, clip coupons or find them online or through apps like Coupons.com. Make a shopping list and stick to it.

7. Boost your income

Whether it’s a one-time windfall or income from a steady side gig, use extra money to pay down debt or boost savings so you don’t run up more debt.

Technology makes it easier than ever to make money on the side. Whether it’s starting a dog-sitting service, selling goods online or taking a part-time job with work-from-home opportunities, there are hundreds of ways to generate extra cash legitimately.

For more, check out “50 Ways to Make a Fast $50 (or Lots More!)

Dealing with debt is no fun. But we’ve partnered with nonprofit credit counselors who want to help and will do it free.

All you have to do to reach one is call 888-739-9616. If a call now isn’t convenient, fill out the form below and they’ll get back to you whenever you tell them to.

Last step, fill out the information below or call us for Priority Assistance

What problems are you having with your report?

Are you facing any of the following?

What types of debts do you have in collections?

Your first name is required. Your first name is required to be at least 2 characters Your first name cannot be longer than 50 characters
Your last name is required. Your last name is required to be at least 2 characters Your last name cannot be longer than 50 characters
Your email is required.
Your phone is required. Your 10 digit phone number is required
Your state is required.
Your age is required. Your age must be between 18 and 99. Your age must be greater than 18. Your age must be less than 100.

By clicking on the "Contact Me" button above, you consent, acknowledge, and agree to the following: Our Terms of Use and Privacy Policy and to receive electronic communications. We take your privacy seriously. That you are providing express "written" consent for Debt.com or appropriate service provider(s) to call you (including through automated means; e.g. autodialing, text and pre-recorded messaging) via telephone, mobile device (including SMS and MMS - charges may apply), even if your telephone number is currently listed on any internal, corporate, state or federal Do-Not-Call list. Consent is not required as a condition to utilize Debt.com services and you are under no obligation to purchase anything.

How do you stay out of debt? Let us know in comments below or on our Facebook page.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
How to Buy a Refrigerator, Step by Step
How to Buy a Refrigerator, Step by Step

Here’s how I got the perfect appliance at the perfect price.

14 Service Providers Most Likely to Lower Your Bill If You Ask
14 Service Providers Most Likely to Lower Your Bill If You Ask

With these companies, it might be easier than you think to negotiate your monthly bill down.

8 Ways to Slash Your Internet Bill
8 Ways to Slash Your Internet Bill

No matter what price you are paying for internet service, taking these simple steps can lower it.

19 Things You Should Never Buy at a Grocery Store
19 Things You Should Never Buy at a Grocery Store

These household necessities are overpriced at the grocery store. Get them cheaper at these places instead.

Want a Healthy Retirement? Turn This Device Off
Want a Healthy Retirement? Turn This Device Off

A common behavior becomes increasingly dangerous for those who are 50 or older.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
Will I Get My Ex-Husband’s Social Security When He Dies?
Will I Get My Ex-Husband’s Social Security When He Dies?

Two factors determine how much money is coming to you.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on these familiar purchases. Yes, even pregnancy tests.

13 Brilliant Bulk-Buy Items on Amazon
13 Brilliant Bulk-Buy Items on Amazon

Every household should have these products on hand. Buying them in bulk on Amazon saves you cash.

6 Reasons I Will Never Trust Suze Orman
6 Reasons I Will Never Trust Suze Orman

Beware: The self-proclaimed personal finance expert has a track record that suggests more sizzle than steak.

5 Household Disinfectants That Can Destroy the Coronavirus
5 Household Disinfectants That Can Destroy the Coronavirus

You likely already have some of these products at home.

This Type of Social Security Benefit Is Often Overlooked
This Type of Social Security Benefit Is Often Overlooked

The Social Security Administration is not helping certain people get money to which they are entitled, a report says.

Getting These 2 Shots Could Reduce Your Risk of Dementia
Getting These 2 Shots Could Reduce Your Risk of Dementia

These vaccines may lower the risk of Alzheimer’s disease by up to 40%.

America’s Most Reliable Appliance Brand Is a Surprise
America’s Most Reliable Appliance Brand Is a Surprise

Have you heard of this appliance manufacturer?

9 Everyday Problems You Can Solve With Vaseline
9 Everyday Problems You Can Solve With Vaseline

Forget expensive specialty products. Good ol’ petroleum jelly can address many common annoyances.

16 Amazon Purchases That We Are Loving Right Now
16 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

19 Purchases That Buyers Almost Always Regret
19 Purchases That Buyers Almost Always Regret

Think twice before buying these things.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

8 of the Worst Things to Buy at a Dollar Store
8 of the Worst Things to Buy at a Dollar Store

Not everything sold at dollar stores is a great bargain or a safe purchase. Here’s our list of products to avoid.

Homeowners Say These 2 Kitchen Appliance Brands Are Best
Homeowners Say These 2 Kitchen Appliance Brands Are Best

One brand takes five of the top honors, while another ranks highest in three categories.

41 Things You Should Never Buy
41 Things You Should Never Buy

Some purchases are just plain dumb. Give yourself — and your budget — a break. Don’t spend money on this stuff.

9 Indestructible Products That Are Worth the Price
9 Indestructible Products That Are Worth the Price

If you’re willing to pay a little more for these products, you may never have to shop for another again.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.