In today’s society, many people believe it is not possible to live without debt. Achieve Security believes that simply is not true. It may seem difficult at first, but you can live without debt. Consider the experiences of your grandparents in the Great Depression. They developed a philosophy of not buying anything if they didn’t have the cash.
In Achieve’s program, you are on a forced savings plan for two reasons. The first reason is obviously to payoff your current debts. The second and possibly more important reason is to help you change your spending habits.
Here are some tips on how to spend and live free of credit cards.
Save an emergency fund. Many people use their credit cards as a sort of emergency fund — if there’s an unexpected expense, the card comes out to the rescue. Instead, use the money you aren’t paying towards debt to build up a healthy emergency fund, keeping you out of debt when something unexpected comes up. Having a strong emergency fund (aim for $1,000 initially, then build it up to 3-6 months or more of expenses).
Save for goals. Once you’ve got the emergency fund adequately covered, you can start saving for other things. Set savings goals for yourself: do you want to travel, or buy a car, or save for college, or renovate your home? Decide on your highest-priority goals, and set a dollar figure. Now save towards those goals. Without debt, it should be easier.
1. Get a debit card. If you need to use a credit card in certain situations, such as buying something online, often you can use a debit or check card instead, if it has the name of a major credit company such as Visa or MasterCard. It can work every place you would need a credit card, but you aren’t using credit — it is debited straight from your checking account, meaning you need to have the money first before purchasing anything.
2. Earn interest instead of paying it. The problem with debt or credit is that you waste money paying interest. It eats away at your finances. Instead, make your money work for you by investing it. With the magic of compound interest, your investments will grow over time, meaning that money you would have been paying toward interest is now earning interest instead and multiplying. That’s good math.
3. Buy a car on cash. For those who have been buying vehicles with auto loans all their lives, it may seem impossible to buy a car on cash. But it’s very possible, and many people do it. My grandparents, for example, always buy their cars with cash (and always have, except for their first car 50 years ago). So instead of making loan payments, and paying double the price of the car or more over the term of the loan, they make savings deposits, and end up with the amount it costs to buy two cars in their bank account over the course of five years. This is something I’m trying to do myself — I’m going to use my current car as long as possible, save the amount that I’m now paying for my loan every month (it’s almost paid off now), and then buy my next car in cash. It’ll be a used car, but it’ll be all mine.
4. Invest for retirement. This is just common sense, no matter what your credit or debt situation, but without debt payments, it makes sense to accelerate your retirement investments (as one of your savings goals). Then you can retire early, thanks to not being in debt.
