Living debt free – is it only a dream?

Even high earning professionals have debt. It seems to follow us around like a parasite we can’t shake. I’m not talking about good debt like a mortgage, but bad debt like the ever-dangerous credit cards and personal loans.

We often take out debt to fund our lifestyle, whether we can afford it or not. High earners spend just as much as lower earning professionals do. The more you earn the more you spend. A fancier car, a larger apartment, eating out at Michelin star restaurants, and a membership to that exclusive country club.

It is very easy to fall into the trap. What we don’t realise, is that debt consumes a substantial portion of our disposable income. Imagine how much you could save or put into an investment with the debt repayments.

The cost of living is increasing exponentially, and it seems impossible to be debt free, but with a few adjustments we can start our journey to being debt free.

  • Save first, then buy – something we all know and have heard since childhood, but very difficult to do. We want everything now and use debt to get it. Saving the equivalent of the proposed debt payment for a period, allows you to buy it cash, have no interest, and gives you the feeling that you have earned it, and best of all, you haven’t eaten into your disposable income.

This is perhaps the biggest challenge but is the start of living debt free. We need a mind shift to be able to achieve this.

  • Create an emergency fund – again, we know this but don’t follow through. Having an emergency fund will prevent incurring debt when emergency expenses arise.

The first two statements are major endeavours for many and are preventive of nature. If you have no debt yet, then you are one step ahead and hopefully don’t fall prey to quick debt.  If you are already in debt and need to get to the above levels, there are small things you can do to achieve this.

  • Pay yourself first – first put savings away before spending. Organise a direct deposit into a separate savings account, and then budget expenses for what is left.
  • Pay credit cards in full or prepay them to avoid interest.
  • Trim the fat – Cut unnecessary monthly expenses like eating out every day, subscriptions and membership and shopping trips during lunch.
  • Turn off auto pay for online shopping – if you have to enter card details every time it might persuade you not to buy.
  • Develop a healthy attitude towards saving and motivate yourself to save.
  • Don’t increase your expenses every time you get an increase. This is Public enemy Number One and probably the biggest reason to fall into debt.

Your financial adviser can help you trim the fat off your expenses and put you on the path to being debt free. [email protected]

 

Please note, the above is for education purposes only and does not constitute advice. You should always contact your deVere adviser for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.