How to Unlock a Debt Free Future

Debt and credit is such an everyday element of modern life that it’s easy to feel like you couldn’t exist without it. However, millions of people live happy lives without holding any debt at all, or with their only debt being in the form of mortgage repayments.

Whether you’re currently in debt and looking to escape the debt cycle, or simply want to learn some tips to help you avoid major debts in the future, these principles will help you to live a debt free life.

Commit to Paying Your Debts Quicker

When it comes to unlocking a debt free future there are two steps to take. The first is to pay off your existing debts. The extent to which you need to do this will depend on the level and types of debt you currently hold.
Simply not accruing more debt alone won’t make much difference, as the interest will still be building up; you need the dual focus of stopping your spending while saving elsewhere in order to pay your debt down quicker and more effectively. Committing to this can be very powerful and make a big difference to your life.
Once you’ve started to deal with your debts it is time to change your mind-set so you’re trained to treat debt with disdain in future.

“Whatever triggers your spending, look to remove it from your life”

Avoid Temptation

Avoiding temptation is about more than simply telling yourself to say no, it’s about identifying the emotional side of your spending habits and finding the underlying cause of why you spend. Do you buy things you want rather than what you need to make yourself feel happy? Do you simply feel the need to spend when you have access to cash or credit?
Whatever triggers your spending, look to remove it from your life. You might do something simple like not buy anything you see until 24 hours later, having had the time to consider whether you need it, or alternatively you might go as far as to give a credit card to a friend or family member to avoid using it.

When you’re Debt Free, Save

Changing your spending habits and training yourself to avoid temptation isn’t something you should forget once you’re debt free. While it will undoubtedly feel great to have a certain amount of disposable income to hand each month, commit to saving as high a percentage of this as you can. People often take on debt for an emergency because they don’t have savings available, so ensuring you have some capital put away could help you avoid falling into debt once again in the future.

“Although the accounting definition of bad debt is monies that cannot be recovered, you can have your own personal definition.”

Treat All Debt as Bad Debt

Although the accounting definition of bad debt is monies that cannot be recovered, you can have your own personal definition.
If you’re taking on a debt that is going to cost you additional money on top of what you borrow in interest, then treat it as a bad debt as much as possible. You can also take it further and say credit cards are a bad debt, even if you intend to pay the full balance each month therefore avoiding any interest.
Debt free living is possible, you just need the positive mindset to help you to clear your debts and prevent yourself from needing to take on additional debts in the future.




What you need to know

Constancy Wealth Management is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 AFSL 232706 and Australian Credit Licence 232706. This information does not take your circumstances into account, so read the relevant disclosure documents and consider what’s right for you. If you acquire an AMP product or service, AMP companies and/or their representatives will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Ask us for more details.

This post contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information