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In Part 1 of my get out of debt post, which is actually Part 3 of the Spend Less Have More Series (confusing, huh?), I outlined exactly what I’ve done to reduce my own debt by 67%. In this post I’m going to explain how to stay out of debt and how to manage your finances while you are paying off your debts and beyond.

First of all, in order to truly take control of your finances, you need to evaluate your current spending habits and trim off the excess. In addition to the methods I taught you in the Save Money on Groceries and Save Money on Electricity posts, there are a few more things you can do.

1. I want you to start tracking every cent you are spending over the course of a month. You will probably want to do this much longer than just a month once you see how much of an eye-opener this is. Set yourself up a simple spreadsheet or even just use a notebook and make note of everything you are spending. Most expenses can fall into one of the following categories:

Rent/mortgage
Car loan
Visa
Store Credit Card
Line of Credit
Electric Bill
Cable
Internet
Phone
Groceries
Insurance
Entertainment
Savings
Other

The goal here is once you see what you are spending in these areas, you want to reduce the frivolous categories, like “other,” which includes money-wasters like takeout, morning latte’s, impulse buys, etc, and put more money into the debt categories, and eventually the savings category.

2. Need? Or Want?

Before you haul out the debit card (because you don’t use a credit card anymore, remember?) you should ask yourself whether you really need the item or if it’s just a want. Better yet, wait a couple of days and see if you still think you need the item.

3. Can I Afford It?

Now that you are paying off (or have paid off) your credit cards, you are not going to use them anymore, except if it will benefit you financially. In other words, if you don’t have enough cash to buy it, or enough to pay for it within 30 days before interest is charged – you don’t buy it. Simple as that. Save up for it if it’s that important. Of course, this doesn’t apply to life-essentials such as medical care, housing, heat, food and water. But if it’s not required to survive, it’s really not an emergency, now is it?

4. Another point worth mentioning here is consolidation loans. They aren’t for everyone, but in some situations they can really help. Essentially, if you have several debts that have a high interest rate, find a bank or company that does consolidation loans and get a loan to pay off all of those smaller high-interest debts and have one monthly payment with lower interest rates. I did this a few years ago with a high-interest credit card that I owed way too much on and it really helped.

Now you have the whole plan for saving money, getting out of debt and staying that way! If you follow this plan and stick to it, it really works. And believe me, it feels so good to be in control of your money and your life again!

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