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Tips to Stay Out of Debt

Updated on July 28, 2014
It is possible to stay out of debt if you follow these easy tips.
It is possible to stay out of debt if you follow these easy tips. | Source

Being out of debt is a great feeling, but staying debt free isn’t always easy.

New debt can come from anywhere: unplanned expenses, emergencies, charging things we really want but don’t necessarily have the cash for or even from a build up of smaller everyday purchases like a tank of gas, that daily coffee, lunches out or trips to the grocery store on the way home.

Fortunately, we can take some practical steps to avoid getting into debt. Understanding why we got into debt in the past, keeping good track of our income and expenses and having a sufficient emergency fund are just a few of the ways to keep debt at bay.

Here are some tips to stay out of debt:

Know Why You Were in Debt

If you’ve been in debt in the past, do you know the exact reason why you got into debt?

For some people, the answer is clear and obvious. Perhaps it was poor spending habits, a lost job or a pile of huge medical bills. For others, debt accumulated gradually, a little here and a little there until one day it became overwhelming.

Once you’re aware of the reason behind past debt problems and learn from your mistakes, you’re less likely to repeat them.

Be Careful with Credit

If you’ve had issues with credit card debt before, here are some tips to avoid the debt trap:

  • Keep your credit card(s) in the car or at home when you’re shopping at places where you’ll be tempted to overspend.
  • Limit the number of credit cards you have. Having department store credit cards for every store you shop in isn’t necessary. No matter how great a deal the cashier tells you it is, it’s not worth the inquiry on your credit report or having the potential to get into more debt just to save 10 or 15% on a one-time purchase.
  • If you really can’t stop using your credit card and racking up debt, cut it up and close your account. Cash, a debit card or a pre-paid debit card may be better options for you. Yes, your credit score may dip for closing a credit card account, but not as much as if you continue to have huge balances or late payments. I’ve listed some more information about credit card alternatives near the end of this article.
  • Avoid cash advances. The fees and high interest rates credit card companies charge for these can cause debt to accumulate quickly.
  • If you use a credit card, pay your bill in full every month.

If chronic credit card debt is a problem, sometimes cutting up the card is the best solution.
If chronic credit card debt is a problem, sometimes cutting up the card is the best solution. | Source

Create and Follow a Budget

There’s no one right way to create a budget. Whether you write down your income and expenses on a legal pad, type them into an Excel spreadsheet or use one of the many budgeting software programs or apps, finding a plan that works well for you and your life is more important than what method you use.

Here are some sites, software and apps that can help you plan a budget and track your expenses. Some even allow you to pay all your bills from your phone.

Pageonce Money & Bills App

Cost: Free
Track your all your bills, make payments, get alerts and more, all with one app.
Works with iPhone, iPad, Android, Blackberry & Windows Phone
Site: Available in iTunes App Store. More info at: Pageonce Money & Bills


Cost: Free is a site that helps you organize and track your money, expenses and bills. They also have free mobile apps for iPhone, iPad and Android.
From“Get a handle on your finances the free and fast way. Mint does all the work of organizing and categorizing your spending for you. See where every dime goes and make money decision you feel good about.”

You Need A Budget (YNAB) - Personal Finance Software

Cost: $65.00
Works with Windows and Mac. A highly rated program that helps you budget, track where your money goes and get control of your finances. YNAB also has mobile apps.

Quicken Personal Finance Software

Cost: $39.99 for the Starter Edition, $69.99 for the Best-Selling “Deluxe Edition”
Software that helps you develop a budget, as well as organize your bills and assets so you see exactly where your money’s going.
Site: Quicken

What is your biggest obstacle to staying out of debt?

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Working hard to keep more of the money you have is one of the best ways to stay out of debt.
Working hard to keep more of the money you have is one of the best ways to stay out of debt. | Source

Reduce Overhead

After you’ve finished your budget, take some time to fully analyze your expenses and see exactly where your money is going. There’s a good chance you’ll see room for improvement in one or more category.

Start by making a list of every regular expense you have. Beside each item, write down a possible way you can either can lower or eliminate it. Perhaps you can raise a deductible on an insurance policy or switch to a lower cost cable or internet plan. Don’t be afraid to shop around for better rates on your phone, insurance and other regular expenses.

In some cases, bigger changes may be needed to stay out of debt and save more money each month. Are you driving a vehicle that costs you a small fortune in gasoline? Think of trading it in for something more fuel-efficient. If housing expenses are eating up too much of your income and causing you to fall behind on other bills or put things on your credit card, consider downsizing to a more affordable home.

Reducing your ongoing expenses, even a little, can add up to big savings over time.

Build a Healthy Emergency Fund

An emergency fund is a vital part of staying out of debt, especially if your budget can’t handle a big, unexpected expense. If you don’t already have one, open a free or low-fee savings account at your local bank, credit union or with an online bank such as Ally, Discover Bank, American Express Bank or HSBC Advance.

Keep this account separate from your other savings and earmark it for only unexpected expenses such as car repairs, medical bills or home repairs. To make saving easier, set up monthly automatic withdrawals from your paycheck or checking account to ensure the money is there when you need it.

How much do you need? At least six months to eight or more months of living expenses is ideal, but if that sounds like an impossible goal for you, do what you can. Even if you just start out with $100 or so, it’s better than nothing and it’ll help get you in the habit of saving.

Watch Those Banking Fees

Many banks have increased their fees across the board in the last few years and those fees can be taking a bite out of our checking and savings accounts. It’s easy to overlook a line of fine print on the bottom of a banking statement telling us about new fees we’re being charged.

Be sure to find out exactly what fees you’re paying at your bank and if they seem high, consider switching to a less expensive type of account or if you have to, shop around for a new bank.

Another way to reduce banking fees is to keep good track of your accounts so you avoid overdrafts or other fees. Regularly check your account information online or use your bank’s mobile app (if available) for up-to-date information on your transaction activity and balances.

Many banks allow you to set up alerts on your online account so you’ll get an e-mail or text for things like a low balance in your checking account.

Increase or Supplement Your Income

If your budget is extremely tight and your income isn’t what you’d like it to be, a few unexpected expenses can send you back into debt. To have amble funds to comfortably cover all your living expenses and have money left over each month, consider ways to increase your income.

If you’re not happy with your current job and income, think about either continuing your education, getting additional training or even transitioning into a job or career that pays better and is more aligned with your interests and abilities.

If you don’t want to leave your current job, think about getting a second job in evenings or on weekends or starting a small business or online business in your spare time.

Live Below Your Means

Living below your means is all about freedom. No matter how much money you make, spending as little as possible of it on your everyday living expenses gives you a sense of freedom that people living beyond their means will never know. Why lose sleep at night because your mortgage payment is so high that if you lose your job, you’ll be out on the streets? Why drive a fancy car you can barely afford? Even successful, wealthy people look for bargains and are very careful how and where they spend their money. If you learn to live below your means not only will you avoid debt, but as your income grows, you’ll have plenty of savings and money for whatever is important to you in life.

Save For Things

Yes, you can use credit to pay for your vacation, a new TV, the latest tablet, clothes or even a car, but the old fashioned way of saving for the things you want or need and paying in cash ensures you’ll stay out of debt.

Credit Card Alternatives

There are people who choose not to use credit cards. Others shouldn’t be using them because they have a problem overspending and getting trapped in a cycle of debt.

Here are some good alternatives to having a regular credit card:

  • Debit Cards – Find a local bank that offers a fee-free debit card that’s attached to your bank account. Your purchases are deducted from your account so you can’t get into debt. Just be careful to keep track of all your transactions so your card isn’t declined or you get charged overdraft fees.
  • Pre-Paid Debit Cards - You can purchase these cards in grocery or discount stores, but they’re not all created equal and many are full of fees that can whittle down your funds. Check out NerdWallet ( for a helpful tool that allows you to sort through 82 pre-paid cards to find which one is best for you. The new pre-paid card called Bluebird ( from the team of Walmart and American Express is getting great reviews for its low fees.
  • Cash – It works just about everywhere except for making purchases online or over the phone, but using cash tends to force people to see what they’re actually spending instead of simply swiping a piece of plastic and forgetting about it until the bill comes.

Here are some additional resources where you can find information about staying out of debt and making smart decisions with your money.


© 2013 carolynkaye


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    • nipster profile image

      nipster 11 months ago

      This is a great article. Although I would have to say that for most people, -not all- but most people, its just best if they didn't deal with debt period.

    • profile image

      Kenneth Avery 3 years ago

      Hi, Carolyn,

      Just wanted a return visit to see this work. And again GREAT stuff. Wonderully-written and presented.

      And thank YOU for the following. I really Appreciate it.


    • carolynkaye profile image

      carolynkaye 3 years ago from USA

      Hi Kenneth,

      I really appreciate your comments. I will check out your Hubs. Thanks again :)

    • kenneth avery profile image

      Kenneth Avery 3 years ago from Hamilton, Alabama

      Hi, carolynkane,

      This was some terrific writing. I loved every word of this hub. Voted up and away. Your presentation was excellent.

      I cordially-invite you to read a couple of my hubs and then be one of my followers. I would love that.

      Keep up the great work.

      Kenneth/from northwest Alabama