There are many reasons people struggle with saving money. Many factors that we are sometimes are unaware of. In this article we will discuss some of these reasons. 11 reasons you are struggling to save money 1.Cost of living It would be an injustice to talk about saving money without acknowledging the cost of living. The inflation rate keeps rising which means prices are hiking while our income remains the same. High costs of living, such as housing, healthcare, and education, leave little room for saving after meeting essential needs. 2. You don't Budget (or stick to it) A budget is to your finances what water is to your body. You might survive a day or two without it but in a long term you will feel the effects. Without a clear budget, it's challenging to track income, expenses, and savings. Overspending becomes common, making it difficult to save 3. You live beyond your means Spending more than you earn will leave you with nothing to save. Spending more than w...
What does it mean to be debt free?
A debt-free individual does not have any outstanding debts.
What causes people to be in debt?
Living beyond your needs
Spending more than you earn will sooner rather than later cause you to be in debt. You will end up not affording your lifestyle and resorting to taking out loans and racking up your credit card.
Medical emergencies
Life is unpredictable. Sometimes it will throw you a medical curveball that will lead you into debt.
Losing your job
Unexpectedly losing your job can lead you to debt. Suddenly losing income will mean needing money to cover your needs and expenses. Debt is a solution for most people in such a case.
However, you can avoid that by building an emergency fund. An emergency fund is money you put aside for such cases.
Divorce
Even an uncontested divorce can lead to legal fees and other expenses. And since no one plans to be divorced, such expenses find people unprepared and they resort to debt to cover the costs.
Divorce also comes with a lot of changes such as a new home, car, etc. Which one might not be able to cover on their own thus leading to debt.
Other unforeseen circumstances
As mentioned before, life is unpredictable. And no matter how much we try to prepare
How to become debt free
Living a debt-free life can take time and will require dedication but it is certainly achievable. You can live a debt-free life by following these tips.
List all debts, interest, payments
To become debt free, you have to pay off a debt that you have already acquired. You need to write down all your debts, the required payments, and the interest incurred. Create a plan on how you will pay it off.
You can use a debt snowball method, debt Avalanche method, or tsunami debt method. Learn more about these methods here
Create a budget
Creating a budget will keep you on top of your finances. You will have a detailed plan on how you will spend your money and how you will manage your finances.
A budget will assist you in living a debt-free life by keeping you accountable and being able to track your spending. You will also know where you overspend and come up with a plan on how to save.
Get a side gig
More income means fewer chances of needing debt to cover some of your needs and wants. A side hustle will give more disposable income. You can use the money you earn from your side hustle to grow your investment, build up your retirement fund, and invest in your kids' education. All these are things most people rack up debt to cover.
Find ways to save money
Earning more alone will not make you debt free. You need to examine your lifestyle and find ways to save money. Financial discipline is important in paying off your debt and achieving financial freedom.
Save up for larger purchases
Creating a sinking fund for your large purchases such as a car or a house will keep you away from financing and debt. You need to save up for large purchases instead of using financing. This might mean taking longer to get what you want and will require patience.
Destroy your credit card
Nothing is tempting like a credit card with credit. Something always comes up when you have good credit and will require you to use your credit card. Keep making payments to your card but physically destroy it to stop you from ever using it again.
Use Cash Envelope System
Plastic money leads to overspending. When you have to physically use your hard-earned money, you are more likely to think twice about it.
Stop comparison
"Comparison is the thief of joy"
I don't know who said this but no truer words have been uttered. Life is not a race and comparing yourself to others will lead you down a depressive path.
Don't let yourself fall into debt trying to keep up with the Jones. You don't know everyone's circumstances. And in the world of social media and sharing only the good, it is easy to get into debt.
Also, be mindful of the content you consume. If the pages and accounts you follow are always encouraging a lavish lifestyle that is centred around consumerism, you will feel unfulfilled and will spend more. you will also get into debt trying to keep up.
Downsize to upgrade
Downsizing to upgrade means temporarily downsizing your lifestyle, home, or car in order to afford bigger and better things in the future.
Downsizing your car or home will leave you with more disposable income to put towards paying off your debt. You can also arrange that disposable income into your savings and investments. It will also give you the option to level up your lifestyle without racking up debt.
Make it a family affair
Including your family and friends in your plan to be debt free is rewarding in the sense that you will have a solid support system and people to hold you accountable. It will also be easier for your family to support your debt-free lifestyle if you explain why.
Avoid expensive hobbies
If you have to pay money to enjoy it then ditch it.
Pros of living debt free
More money
Being debt-free means you will have more disposable income as you will not be dedicated to paying off debt.
Less stress & anxiety
Debt is emotionally taxing.
Financial security
When you have debt, it is difficult to build your investments and grow your emergency fund. Being debt free will afford you an opportunity to grow your savings and invest more. It will also mean that you have the security of knowing that you own all that you have.
Cons of living debt free
Negative impact on credit score
Credit score growth is dependent on long-term debt and history. Paying off your debt completely and living a debt-free life will negatively impact your credit score.
Opportunity cost
It is an undeniable truth that most assets and life opportunities are affordable through financing for an average person. Things such as housing, cars, and college are expensive and mostly require financing in order to obtain them.
Living debt-free will, therefore, comes with a sacrifice. You will have to lose some opportunities due to limited finances.
How to be responsible with debt
A debt-free life is ideal for everyone. We all dream of it. But it might take time and some situations may arise where debt is absolutely necessary. In that case, you will need to be responsible for the debt. And remember debt, when used responsibly, can also help you achieve your financial goals and lead you to financial freedom.
Here are some ways you can be responsible with debt:
Making minimum payments
Making payments on time is vital for your credit history.
Not using debt unless necessary
Find alternative first
Before you resort to debt try to find other ways you can cover that expense without financing. Is there a way you can earn more money or maybe sell something you own to cover what's required? Can you do without that which requires debt?
Compare lenders
Do not just accept the first offer that you get. Compare lenders and try to negotiate for better interest and credit terms.