While it's not unusual for young people to incur debt as they establish themselves, at some point it has to end. There are proven methods for becoming and staying debt-free. Here are three steps to help you say goodbye to debt:

1. Earn more.
2. Spend less.
3. Budget.

One Thing

Do you remember the scene from City Slickers where Jack Palance explains to Billy Crystal the secret of life? “This,” Palance says as he holds up a finger. “One thing,” he continues. “Just one thing.” 

If you want to succeed at anything in life, you have to make it the number one thing, almost to the exclusion of everything else. 

No, it doesn’t mean you have to abandon God and family in the pursuit of your dreams. There’s still room in your life for other things. But you have shift your priorities, at least temporarily, so you can focus on your goal and build momentum.

Most of us are creatures of habit; we tend to do what we’ve always done. If up until this point in life you have always been in debt, chances are you will always be in debt. If you want to get out of debt and stay out, you need to make some changes in your life. You have to make getting out of debt the most important thing. At least until you can see light at the end of the tunnel.

Earn More

In real estate, there is no substitute for square footage. In racing, there is no substitute for horsepower. And in personal finance, there is no substitute for earnings. If you want to get out of debt, you need to earn more money. It’s as simple as that.

Ask your boss for a raise. Open your own business. Get a second job. If you want to get out of debt, you need to bring home the bacon and lots of it. Figure out a way to earn more money and put the plan into action. 

Spend Less

As you prepare to say goodbye to debt, the second step is to reduce your spending. It’s not as hard as you think. Here are a few suggestions: 

• Don’t stand in line with the other lemmings every time a new device comes out, like a new iPhone or Xbox. At this point the technology has matured; each generation has fewer and less significant innovations. Keep using what you have and be happy with it. 
• You don’t need a mountain of shoes, you only have two feet. Admit you’re a shopaholic and seek help.
• Don’t go out to the bars every night and blow all your money on overpriced drinks. For the price of one glass of wine at a bar you can buy a box of wine that will fill 20 wineglasses. Boxed wine is not bad, don’t knock it until you’ve tried it. 
• Eat dinner at home instead of going out.
• Bring your lunch to work. It’s cheaper, healthier, less calories, easier on your stomach, and less time-consuming.
• Don’t go to the mall and pay $200 for jeans with holes in them. The holes are free at thrift stores.
• Don’t pay $20 for new book releases in hardcover, books are only $1 at Goodwill. Online you can find thousands of eBooks for free. 
• Use a discount cell provider, they run on the same networks as the primary carriers for about half the price.
• Switch car insurance companies to one that doesn’t spend millions on advertising. Visit Insurance Panda to find a company you’ve never heard of that offers comparable coverage for half the price.

Automobiles

For most of us, our automobile is second only to housing in terms of top monthly expenses. If you are seriously in debt, ask yourself if you could do without a car for a while. You could use public transportation instead. Doing so would have a major impact on your ability to say goodbye to debt. Not owning an automobile frees you from car payments and other costs such as gasoline, maintenance, repairs, insurance, license fees, tolls and parking.

At some point in life, you need to stop making car payments and start buying cars with cash. Once you pay off a car loan, keep the car and start putting the same amount as the monthly car payment into your savings account. When you have saved enough to buy your next car, do it. Then continue to save each month for your next car.

Budget

The third and final key to getting and staying out of debt is to budget. If you do not have a budget, you need to make one. If you don’t like the term Budget you can use Spending Plan instead. 

A budget consists of your monthly take-home pay (net after-tax income) balanced against your monthly living expenses such as your house payment or rent, car payment, groceries, gasoline, insurance and utilities. If your total expenses exceed your take-home pay, you’ve got a real problem. That means you are spending more money than you make which will take you even further into debt. 

Set a goal to live on about 75 to 80 percent your net income. That way you can use the other 20 to 25 percent to pay off debt. Once you say goodbye to debt, you can switch to saving for unplanned expenses and retirement. Check out How to Create a Budget for more details on how to develop a proper budget.

Final Word

To say goodbye to debt you need to earn more, spend less, and stick to a budget. It really comes down to self-control and living beneath your means. You should always strive to have more money than month, not the other way around. 

Photo credit: Pixabay The Eggstack Blog will never post an article influenced by an outside company or advertiser. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future.