My Mortgage Blog

We all know that good financial habits include eliminating debt, but what else can you do to ensure you remain debt free?

My friend and RealtorĀ®, Karen MacPherson, recently sent me these five tips to keep you debt-free, and I thought it would be good to share it with you. Sadly summer is long over and the holiday season is right around the corner. These tips will come in handy!

5 Good Financial Habits

1. Be mindful of spending

Whether you want to lower your debt or pay it off altogether, it's crucial to be conscious of what you spend. Track your expenses to help you see where money is going. As we move into the holiday season, keep yourself on track and don't spend more than your budget. This way you'll be sure not to be over extended come the new year.

2. Create and stick to a budget

Create a realistic budget that includes all of your normal monthly expenses. Remember any additional payments you plan to make toward paying down your debt. 

Stay tuned for an upcoming blog post on how to create a budget. In the meantime, if you need an easy template for a budget, let me know, I can help!

3. Pay off one debt at a time

Although you may be in a hurry to pay off debt, the process takes time. Focus on paying down on debt at a time until it is paid off completely. Not only will this keep you motivated to stay on track, it'll also help you tackle your debt in a sustainable way.

Start with your higher interest debt first, making sure you make at least the minimum payment amount on all debts. Getting rid of higher interest debt first just makes financial sense.

4. Continue building your emergency savings

While you're paying down your debt, continue to save money in your emergency fund. Make sure the amount you set aside allows you to comfortably stay on track with your total spending. Include it as a line item in your budget so you treat it as another expense to pay.

Having an emergency fund will help you not end up back in debt when you have a large, unexpected, expenditure (ie. your car breaks down or you need a new furnace).

5. Keep contributing to your retirement

If money is tight, consider only temporarily reducing your contribution and look for additional ways to make budget cuts. Make it a goal to increase your retirement funding as soon as you are able.

Remember, paying down higher interest debt makes more sense than saving in a lower interest return investment - ie. if your credit card rate is at 19% and your mutual fund is only earning you 6%, paying down that debt first makes the best sense.