Staying Out of Debt

10 Tips to Stay Out of Debt

The key strategy for staying out of debt is creating a realistic monthly budget for that includes all income and expenses, and once created sticking to the budget.

As part of this budget, identify any necessary purchases that you know will have to be made during this year — a renovation, new car, or a new home appliance. Think about establishing a money goal for the family. Do you want to be debt-free? Do you still need to build a nest egg? Is college or retirement saving looming large?

Set a realistic monthly contribution amount towards the goal that works within your expected budget. See the Bills.com resource Budgeting Basics to get started with a budget.

The easiest way to stay on a budget is to spend less. Here are 10 common (and not so common) sense tricks, tips, and techniques for saving money:

1) Use cash or a debit card

Studies have found that people spend around 15 percent more on purchases paid with a credit card.

2) Eat in or bring a meal

Make lunch or dinner at home instead of "grabbing a quick bite." Saving at least $15 per week by cutting out a restaurant meal or two will add up to $780 annually.

3) Stop the expensive little indulgences

Common knowledge tells us that over the past few years of recession, people bought fewer expensive coffee drinks. Yet Starbucks' revenues are rebounding, an indicator that people might be ordering again. Breaking a twice-a-week latte habit can save $500 annually. If coffee is not your vice, then review your little treats to see if you can economize painlessly. Are yours pay-per-view or premium cable? Daily soft drinks? Weekly clothes shopping? An expensive hobby? Prepackaged meals, such as frozen dinners?

4) Cut your communications costs

Drop your land-line and use only your cell phone or make calls over the Internet using a service such as Skype. Wait before buying a smart phone.

5) Shop for insurance

Talk with your agent about raising the deductible or finding other discounts if you have a clean driving record. Gather all of your policies and shop around for equivalent coverage at different companies.

6) Make your used car last longer

Fuel economy is important, but it is not the greatest cost in owning a vehicle. Depreciation is the largest cost of owning a vehicle. The longer you hang onto your used vehicle, the lower your transportation costs will be. On that subject, if you own more than one vehicle, do you really need your second car? Your third?

7) Buy out of season

Does a new snowblower work better than an last-year's model? Can anyone aside from the judges on "Project Runway" tell if that dress is from this season or last? Make close-out aisles and bargain bins your friends.

8) Pay yourself

Set up an automatic transfer or deduction from your paycheck into a saving account. If you do not realize it is gone, you will not second-guess the practice.

9) Make retirement saving a priority

Many focus on college savings because that cost will arrive sooner. However, there are many other ways families can pay for college — scholarships, grants, and loans. If you have to choose, save for retirement first.

10) Identify ways your employer can help you save

Health Savings Accounts and matching 401k contributions are good places to start. Although many companies are avoiding pay raises or bonuses, benefits may contain compelling cash savings.

For your monthly bills, be sure that you do not miss a payment. One late payment can lower your credit score. Use online bill pay or email reminders if necessary. Also, pay down credit card debt first. Credit card debt is often the most expensive debt, in terms of the interest rate you are charged. It can become unmanageable, if you are only paying the minimum amount, especially if you continue to use the cards.