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Personal Financial Strategies to Become Debt Free.

Updated on January 16, 2016
Time and money
Time and money | Source

Control Your Finances: There is Good Debt and Bad Debt!

Why do we borrow or in other words, ‘spend what we don’t have’?

The answer is because we want something and we want it now, but we don’t have the cash to pay for it. We either get a loan from a bank or financial institution or use our credit card. This need for instant gratification has a cost – it’s called interest.

Credit card debt is one of the highest costs of interest and can put us on a rollercoaster ride where we are not in control of our finances or of our destiny.

The Golden Rule for borrowing: Borrow for things that appreciate in value and/or will generate income and avoid (or minimise) borrowing’s on things that depreciate in value.

Action tips: How to get out of debt - Take back control of your life.

  • If your credit card has never been paid in full each month then stop using it. Best of all cut it up or place it in a sealed envelope and ask a trusted friend or family member to keep it for you. Tell them that they are not to let you have it on any account.
  • Pay the highest interest cards and debt first, making sure you still make some payment on due date to other loans.
  • Do a budget! Boring as it may sound it is one of the most important things you can do. And even if you don't look at it again it will make you more aware of how much you are spending. It's no use burying your head in the sand. Be aware, and take charge.
  • Your budget should include annual expenses as well as those monthly bills and your casual spending.
  • Try keeping a notebook for a few weeks and record your spending. You may be surprised at just where that money is going.
  • Once you've kept your note book for a couple of weeks revisit your budget. Is it realistic? Can you tweak it? One less $5 coffee a week will give you $260 a year and little savings like this do add up. Make it a game to see how much you can save.
  • If you get a pay rise or an unexpected bonus pay this off your debt. When debt is out of the way you can then start a saving plan with the amount. Don't increase your lifestyle because you've got extra cash, you got by without it before so don't get used to having it for spending.


The Real Cost Of Credit Cards

Many people get a credit card without being aware of the costs. Credit cards come with hidden costs and charges, and you should always be aware of these before you apply. Although fees will be in the terms don't be afraid to ask the question of the supplier. In many cases, these fees and charges don't get noticed until it is too late.

Being unaware of the hidden costs of credit card could easily end up costing card holders thousands of dollars by the end of the year – without them realizing it. If your credit card has rewards, these rewards could easily be destroyed by these hidden costs. Even though some users may realize it, many have no idea of the costs.

One of the first hidden costs is found in the grace period. Always pay your credit card on or before the due date. After this period interest will be charged. And if you haven't made the payment in full, only covering the minimum required, interest will accrue from the period before the due date.

Late fees are common with credit cards and this is another factor that is often overlooked. Some people just choose to pay it, unaware that these costs are adding up. You should always know what the late charges are and how fast they can add up. Paying your bill late is never a good thing, as it can easily destroy your credit rating. If you continue to make late payments, your company or bank may increase your interest rates.

The easiest way to avoid any type of hidden fees or costs is to pay your bill on time and in full - as soon as you receive it or at least by the due date. If you are unable to pay in full you should pay more than the minimum, making sure that you pay it immediately you receive the bill. This helps to pay your bill off faster and ensures that you are paying the principal and not just the interest.

Remember that no matter what you do, you should always pay your credit card bill on time. Credit card companies and banks won't specifically tell you what the hidden fees are, unless you ask them. Of course they will have been in the terms when you signed up but how many actually read this information?

To protect yourself and your credit - you should always be aware of the costs - and how to prevent expensive surprises from happening to you.

Stop Thief
Stop Thief | Source

Protect Yourself from Credit Card Fraud

Unfortunately credit card fraud is really quite common these days, but there are ways that you can help to protect yourself. Becoming a victim of credit card fraud causes a lot of unnecessary hassle and is a very stressful experience.

  • Don't give your PIN to ANYONE!
  • Never sign a blank receipt
  • Check your statements monthly and report any add transactions
  • Carry your cards separately to your wallet...reduce the loss if stolen
  • Use a credit card protection sleeve
  • Keep your eye on your card during transactions

Shell-D RFID Blocking Credit Card Protector,RFID Blocking Aluminum Wallets for Women & Men Card Holder for Metal ID Credit Cards Case (Upgraded)
Shell-D RFID Blocking Credit Card Protector,RFID Blocking Aluminum Wallets for Women & Men Card Holder for Metal ID Credit Cards Case (Upgraded)
I was given one of these for my birthday last year and I've been very pleased with it. It holds all my credit cards and EFTPOS cards. After getting my credit card with its chip to use 'pay wave' I was a bit apprehensive...aware that thieves can scan through your wallet and bag! Now I feel so much more confident.
Piggy bank
Piggy bank | Source

Stabilize Your Current Situation Before You Invest

Before investing in any type of market, you should take a good look at your present situation. Investing in the future is a good thing, but clearing up a bad situation is much more important.

If, for example, you have $20,000 to invest, but you have $20,000 worth of bad credit, you are better off clearing debt first!

Create a monthly budget and get an idea of what you spend your money on. Get rid of unnecessary expenses. Pay off high interest credit cards and get rid of them. If you have any high interest loans, pay them off as well.

Get yourself into a good financial position before investing. There is no use investing if you are struggling with your monthly bills. There will be time for investing later.

Educate yourself while you are in the process of clearing up your present financial situation so that you learn about various types of investments. When the time comes you will be armed with the information to make sound investment decisions for your future.

Love shopping
Love shopping | Source

Take the Test

Are You a Compulsive Spender?

Answer these questions truthfully:

1.) Does your spouse or partner complain that you spend too much money?

2.) Are you surprised each month when your credit card bill arrives at how much more you charged than you thought you had?

3.) Do you have more shoes and clothes in your closet than you could ever possibly wear?

4.) Do you own every new gadget before it has time to collect dust on a retailer's shelf?

5.) Do you buy things you didn't know you wanted until you saw them on display in a store?

If you answered "yes" to any two of the above questions, you are an impulse spender and indulge yourself in retail therapy.

This is not a good thing. It will prevent you from saving for the important things like a house, a new car, a vacation or retirement. You must set some financial goals and resist spending money on items that really don't matter in the long run.

Impulse spending will not only put a strain on your finances but your relationships, as well. To overcome the problem, the first thing to do is learn to separate your needs from your wants.

Advertisers blitz us hawking their products at us 24/7. The trick is to give yourself a cooling-off period before you buy anything that you have not planned for.

When you go shopping, make a list and take only enough cash to pay for what you have planned to buy. Leave your credit cards at home.

If you see something you think you really need, give yourself two weeks to decide if it is really something you need or something you can easily do without. By following this simple solution, you will mend your financial fences and your relationships.

Are you an impulsive spender?

See results

First Steps to Budgeting.


If you are taking your first steps to budgeting -- congratulations! Setting up your budget will give better control over your finances. It is not difficult but it takes a bit of time at the beginning. Here are the steps to take:

  1. Calculate your regular income from all sources such as wages, interest on savings, overtime or any other sources of income. Variable income such as bonuses, tips and overtime should be listed separately as you cannot rely on these.
  2. Identify your expenses. There are three major categories: commitments, essentials and discretionary.

  • Commitments include housing costs such as rent or mortgage, loan payments, insurance premiums, and utilities. They are the must cover expenses.
  • Essentials include food and clothing. Just don't confuse clothing with keeping up with the latest fashion trends!
  • Discretionary spending is for items are not essential expenses but something that is nice to do, such as your daily caffeine fix. As this is an area that can get you into most trouble with overspending you will find it helpful to record your discretionary spending in a small book for a few months. This way you can see exactly what you do spend your money on.

Compare your income and expenses to see if you are living within your means. If your spending is more than the money you have coming in this is known as a deficit. You will need to do some tweaking on your budget -- start with the discretionary category. If your income exceeds your expenses then: congratulations -- this means you have a surplus!

Artwork by Lyn

The Budget Puzzle - newly published

I don't feel it is right to review my own work so I have included one from Amazon.

The Budget Puzzle
The Budget Puzzle
"Detailed and perceptive cash management. Useful and practical, the book contains everyday financial advice to assist anyone achieve their retirement goals."

Take the Poll!

Budget | Source

Do you budget?

See results

Disclosure Statement

A Disclosure Statement relating to the financial adviser associated with this lens is available on request and free of charge.


Only borrow for things that increase in value or help produce income.

Control your expenses and remember to's not a dirty word!

Let me know what you think. - Do you have any ideas?

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    • profile image


      7 years ago

      Great lens! Thanks for sharing!

    • profile image


      7 years ago

      Great article! Packed with great information.

    • JenwithMisty profile image

      Jen withFlash 

      7 years ago

      Nice lens! Thanks for the tips! I sure need any I can get!

    • profile image


      7 years ago

      Great advice.........especially in today's world.

    • profile image


      8 years ago

      Thanks for some great tips:) These are useful.

    • Linda BookLady profile image

      Linda Jo Martin 

      8 years ago from Post Falls, Idaho, USA

      Thanks for taking the time to share your information on financial planning.

    • goldenrulecomics profile image


      8 years ago from New Jersey

      Very good advice. Nice lens

    • Sara Krentz profile image

      Sara Krentz 

      8 years ago from USA

      Thanks for the tips.

    • profile image


      8 years ago

      I have been in the worst of financial crises situation's and know the value of a debt free life. I struggled after divorce for many years and still can't afford what I would love for my children. However, I will not accept a credit card offer from any company. Not worth the worry. I've cleaned up the stuff my X created and own my car, finally. I don't even have a real job that I worked so hard to climb for. But, I'm doing what I love and we just live differently than most. I shop Good Will , we call it "Boutique GWA" :) and wear Ann Kline, Nieman Marcus and many other nice things rich people throw away because they bought the wrong size. I could go on forever. I'm so glad you did this lens. Young graduates need to know now not to get into that credit card trap. Thanks for sharing all your important strategies. Blessed!

    • MBurgess profile image

      Maria Burgess 

      8 years ago from Las Vegas, Nevada

      Great lens! I use a Quicken checkbook program for checking my budget and for reports on my spending. That stuff adds up. Thank you for all the great advice!

    • BestMusicGear profile image


      8 years ago

      Great lens! I totally agree -- money needs to be handled with intention....

    • ShariBerry profile image

      Sharon Berry 

      8 years ago from Michigan

      Great and useful tips.

    • karen550 lm profile image

      karen550 lm 

      8 years ago

      Fabulous lens! I like the good-debt, bad-debt rule of thumb. That seems more sensical to me whereas some will tell us to never borrow. Sometimes we just have to. I also really like the Action Steps. Thank you!

    • profile image

      candz1 lm 

      8 years ago

      Hi there, i just wanted to say i nominated your lens for lens of the day, it's great how you're helping people that may have finacial struggles. : )

    • profile image


      8 years ago

      Amazingly useful tips and advice here for everyone. Great lens.

    • norma-holt profile image


      8 years ago

      Great tips here and nicely presented. Featured on Blessed by Skiesgreen 2012-2 and also on Money and Society

    • ajgodinho profile image

      Anthony Godinho 

      8 years ago from Ontario, Canada

      Valuable tips and informative lens on managing debt. I've been fortunate to never carry my monthly credit card balance forward. I enjoy the convenience and loyalty points which have benefited me greatly. My only debt right now is my mortgage which I can pay off if I need to, but I got a great rate and am getting a much higher rate through my investments which I manage myself through ETFs.

    • profile image


      8 years ago

      I've been through the whole credit card thing and I know how frustrating it can become. Your lens has some excellent, commonsense, reality-based advice that people would do well to follow. Really good lens!

    • profile image


      8 years ago

      Together with my colleagues, raise the maximum funds per our operating agreement for the present investment Fund; close it to new investors & then form subsequent Funds, meeting our fund-raising goals with each! Also, surpass investor expectations for return on investment, which makes subsequent fund-raising goals easier to meet!

      Alternative Investment

    • profile image


      9 years ago

      Becoming debt free is extremely difficult. When considering debt freedom, it's important to try to consider debt consolidation prior to debt settlement as its less impacting on the consumers credit score. Mike @

    • denetraharris profile image


      11 years ago

      great lens, I'm on my way to becoming debt free!

      check out my financial lens at

    • profile image


      11 years ago

      Very nice lens. Finance Articles. good resources you have on this lens.

    • profile image


      11 years ago

      great hub, specially for times like this. thank sfor the ideas.

    • profile image

      tranndee lm 

      12 years ago

      What great and thorough hub! I am forwarding to several people including my brother-in-law for him to especially read the part on stabilizing your situation. He just came into money that he wants to invest in CDs, but he owes credit card debt! This lens is timely for me.

    • ms-giggles profile image


      12 years ago

      Hi Lyn, Our finances need a check up and your lens is a great place to start. Wonderful, very informative lens.

      Have a Blessed Day, Beth

    • profile image


      12 years ago

      Hi Lyn, thanks for this great lens! One tip I have is to keep your checkbook balanced. I think a lot of people neglect this with the popularity of online banking. I've just created a lens about it to help people learn how.

    • profile image


      12 years ago

      Loved your lens! 5* from me ;o)

      One way to get your self out of debt would be to explore the endless number of opportunities to get rich online.

    • profile image


      12 years ago

      People need to get educated about finance. Especially with today's current credit crunch.

      Unsecured Loans

    • profile image


      12 years ago

      Yeah I've made my mistakes in the past, wish someone would have showed me how credit screws you up. It actually funny. I bought a computer like 7 years ago on a credit card. This year I bought one with cash. I actually paid off the newer one first.

    • profile image


      12 years ago

      Great information Lyn! This year I plan to take more control in this area myself and this info will surely help me achieve that.

    • profile image


      12 years ago

      This is a great tip for people with bad credit history.

      - Bad credit personal loans

    • profile image


      12 years ago

      Great info!

    • profile image


      12 years ago

      The advice is sound and meaningful. Personally, I found the page a bit long.

    • profile image


      12 years ago

      Great Personal Finance lens for getting control of your money.

      I agree with the principles!

      Keep it Up!

      I gave you 4 stars!

    • profile image

      Loyalis LM 

      12 years ago

      Great lens, 5 stars!

    • profile image


      12 years ago

      Great info here Lyn

    • profile image


      13 years ago

      Hello Lyn

      Really helpful great lense! You're bookmarked and voted.

      See my lense about Right Payday Loans. Regards.

    • profile image


      13 years ago

      Wow, great lense! I think some of your readers might be interested in making money online with a legit outfit. They pay cash to take online surveys. Here is the link to Cashcrate. We're making a couple hundred/mo and paying off debt! :) Good work!

    • profile image


      13 years ago

      Great lens! Great articles, resources and book suggestions. Good to see a fellow CFP on squidoo!

    • profile image


      13 years ago

      Thumbs up! I see I follow a lot of your golden rules!

      Now, any tips on winning the lottery?


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