A wise man once shared a simple, but a critical observation about the art of money management that is lost on many: rich people don’t stay rich by spending a lot of money.
Now, you can obviously look at the obscenely extravagant lifestyles enjoyed by some rich people (especially the types with their own reality shows) and see that this isn’t always the case, but the takeaway that wise man was trying to impart was that good spending and saving habits are the keys to a secure financial future.
With that in mind, here are some tips you can use even early on in life to minimize costs, maintain a debt-free life, and save money.
#1. Keep Close Track of What You Spend
Unless you’re saving all your receipts and keeping track of exactly how much you spend on everything, there’s a good chance you’re blissfully unaware of how much you spend on certain purchases you consider trivial.
Sure, buying breakfast at the office might only cost four bucks and save you the effort of having to cook, but that’s also around $80 a month you could save by taking five minutes to whip up an egg sandwich or toast a bagel.
Many people who don’t look at the way these costs add up are shocked when they realize they spend more on these kinds of things than they do on their utilities.
The little costs add up really quickly, and one of the best things you can do to avoid debt is keep a daily chart tracking these expenses so you can nip them in the bud before they get out of control.
#2. Avoid Spending Money on Things You Won’t Be Able to Pay Off Within a Short Period
Interest rates on credit cards can be a killer, and if you’re not careful, you can rack up thousands of dollars of debt really quickly.
Unless it’s something that’s really of life-or-death importance, try to avoid buying anything you can’t pay off in less than three months, especially if you’re living on an entry-level salary.
#3. Cut Back on Unnecessary Expenses
- How much stuff do you pay for that you don’t really need?
- Do you subscribe to a cable package with additional networks you don’t ever watch?
- Do you have a bigger data plan on your cell phone than you need?
- Do you really need to crank the heat up a few extra degrees, or could you throw on a sweater and be fine?
It’s not at all uncommon for people to pay for lots of stuff they don’t actually need. A lot of times they’re the default option when you sign up for thing requiring an annual plan because even if you can change it to a cheaper plan later, the providers know you probably either won’t or will overpay for at least a while before you do.
Don’t give them more money than they’re earning.
#4. Find Ways to Create Additional Income Streams
One of the biggest mistakes people make when looking to increase their income is focusing entirely on their full-time career.
Don’t get me wrong, everyone should explore better opportunities and search for higher paying jobs wherever possible, but that’s not always possible, especially since the Great Recession in 2008.
Another thing people either overlook or don’t want to invest the time it is starting a side business to earn extra income. If you’re a good writer, artist, or have some other marketable skill, there are a million ways you can leverage that for a nice chunk of cash on the side.
Another benefit to doing this is that, if you ever lose your full-time job, you still have some money coming in to cover the basics until you find something new.
#5. Prioritize Where You Plan to Spend Your Money
Different people want different things out of life, and as such, you should budget your money accordingly.
Do you want to settle down, buy a house, raise a family, and take them somewhere nice on vacation each year?
If so, you will need to devote your income in an entirely different direction than someone who wants to stay single, spend a decade traveling the world and living abroad, and experiencing life to the fullest.
Knowing how to get out of debt isn’t the only important debt management skill, and in fact, it’s not even the most important.
Above all else, you want to avoid getting into debt in the first place, and by following the tips outlined above, you can avoid many of the significant, debt-inducing mistakes most people just starting their working lives make.