11 Good Money Habits That Will Keep You Out of Debt


Staying on the straight and narrow, especially when it comes to your finances, can feel like a struggle. Recreational activities, impulse buys, monthly bills, and unexpected expenses lurk around every corner, and if you're not careful, you can slide into debt without really trying.

If you practice good money habits as a general life philosophy, however, you're giving yourself the best chance of staying in the black consistently — and perhaps even making those coveted savings gains. Here's how.

1. Create a Budget Based on Life Goals — Not Numbers

Every article you read about how to improve your personal finances includes creating and maintaining a budget. That's because actively keeping track of what's coming and going helps you manage your money more responsibly than simply throwing caution (and cash) to the wind. But your budget is only serving a single purpose when it's strictly rooted in numbers opposed to relating to your personal activity and short- and long-term goals — like an upcoming vacation or contributions to your retirement fund, for instance.

As such, instead of living your life around your budget, you'll find much more satisfaction in building your budget around your life. By planning ahead for expenses, even frivolous things, you can identify the areas where your budget is lacking and (hopefully) close those holes by either amending your plans to accommodate your cash flow or increasing your income to afford the things that make you happy.

I recommend the latter, of course — because you only live once.

2. Charge Only What You Can Afford to Pay Off Every Month

Let's get something straight here: Credit is not as dastardly an institution as you've been led to believe. Yes, there are credit cards with astronomical APRs. And, yes, there are credit cards with ridiculous late fees. But at the end of the day, you're responsible for reading the fine print (you know it's there!), and nobody is forcing your hand in accepting an offer.

Still, credit is attractive because it allows us the freedom to have more than we can afford. But whose problem is that when you can't pay the bill? All yours. Avoid this downward spiral by making your credit card payments top priority each cycle.

"Credit cards are not evil, but they can make a mess of your finances if used unwisely," says savings expert Kendal Perez. "Ultimately, you should only charge what you can afford to pay off every month. Using your credit card to pay bills is a smart strategy since you have to pay these expenses anyway, and using credit means accruing points, rewards, or travel miles to offset future expenses."

See also: 12 Habits of Responsible Credit Card Users

3. Look for Savings on Everything You Buy

I personally save many thousands of dollars every year by being a smart shopper, because there are few things I buy for which I don't have a coupon or discount. From dining out to going to the movies to the clothes I wear to the gas I put in my vehicle — everything comes with savings.

It's not hard to get into this habit, either. I save by using loyalty cards, clipping coupons, redeeming cash back deals, signing up for promotional emails, waiting for items I want to go on sale, shopping clearance sections, and buying secondhand, among a myriad of other strategies. It's like a game for me, and I hardly ever spend money on something for which there are no savings; I look for a cheaper alternative instead. It's a major reason why I always have enough money in the bank to cover my bills, plus add to savings while still doing the things I like to do every month.

4. Buy Groceries Based on What's on Sale and in Season

Groceries are one of the biggest spending categories for Americans, next to mortgages and insurance. Instead of buying what you're craving, buy groceries based on what's in season and what's on sale. (See also: The 5 Best Credit Cards for Groceries)

"This will require some meal planning, but you can craft similar meals based on what's on sale each week," explains Perez. "Use a tool like Flipp.com to easily compare grocery sales and deals between stores in your area, and consider looking for grocery coupons for items on your list through CouponSherpa.com."

Another trick I use to cut my grocery bill is to shop the clearance section. Most supermarkets have these sections with drastically reduced prices on damaged or about-to-expire food that's still perfectly good if you get to it in time. Ask your grocer where these items are located in your store.

5. Organize Your Bill Payments to Avoid Lateness

As soon as a bill arrives, I grab my checkbook (yep, I'm old school), write out the check, and prepare the envelope. On the back of the envelope I write the dollar amount that's inside as an at-a-glance reminder, and I organize the bill on my desk according to when it's due. Then I stagger the mailings — sending each payment out about five days before it's due — to ensure that I can reconcile all the bills with my bank account.

Consumer finance expert Kevin Gallegos offers more tips on how to avoid late payments.

"Open all mail — including bills — upon receipt, deposit all checks and cash immediately, and set up a system for payment that works for you and that you'll use consistently," he says. "This might be automatic online payments, a spreadsheet, a reminder on your cell phone, or a list on the refrigerator."

6. Map Out Your Long-Term Financial Goals

The only way you'll get ahead in your finances is if you know where you're going. Take a look at what's coming up in terms of required expenses and also think about some of the things you'd like to do with your money. Do you want to go back to school, on vacation, or purchase a new car or home? Set these milestones as goals and calculate what it'll take financially to reach them, then start saving in increments along an established timeline.

7. Review Your Finances on a Regular Basis

Reviewing your finances on a "regular basis" is a relative term, but I typically suggest once a month. There's value in doing it more often, however — like once to twice a week — according to personal finance expert Larry Jacobson.

"You need to set regular intervals to stay on the right path," he says. "That way, you can course correct, if necessary, before it's too late."

When reviewing your finances, be sure to cover all your bases. Browse your credit score for any errors, review bank and credit card statements for inconsistencies, and make sure all checks have posted. It's also a good idea to call your service providers once a year to inquire about better deals, like cheaper mobile phone or cable plans.

8. Treat Savings Like One of Your Monthly Bills

Instead of regarding contributions to your savings as a chore, start considering it a requirement, says Gallegos. Treat your savings deposits like a monthly bill; find that extra money somewhere in your budget (a reasonable amount that you can handle) and tuck it away as if you'll be penalized if you don't. You may have to make a sacrifice somewhere else, like in your "fun" fund, but, well, that's life.

9. Learn to Live Below Your Means

If you're one of those people who responds well to logic, here's a pro tip on staying debt free: Live below your means.

"Know exactly what you have to spend each month — and spend less," says Gallegos. "Living beneath your means goes further than living within your means. It means taking responsibility and choosing where your money goes instead of being influenced by whims, advertising, habits, or peer pressure."

If this is a tactic you'd like to try, you'll need to re-evaluate your budget entirely. Find items you can reduce or eliminate altogether to free up funds, like subscriptions and memberships that you aren't using to their full potential, cutting back on dining out, and reducing your monthly fuel bill by carpooling with a coworker or using public transportation more often.

10. Switch to a Cash-Only System

Here's another piece of practical advice that leads your wallet away from debt: Only pay for things in cash.

"You can't go into debt if you don't borrow," says Mike Sullivan, a personal finance consultant with Take Charge America, a nonprofit credit counseling and debt management agency.

I recognize, of course, that that's easier said than done, so Sullivan offers a couple more strategies for holding yourself cash-accountable.

"Save with direct deposit at out of town banks," he says. "You don't want your savings available on a whim; Internet banks are a good choice. And don't sign up for overdraft protection. That's agreeing in advance to spending more than you have and paying for the privilege."

11. Make More Money

One of my own personal money manifestos is to always have at least two sources of income. I'm self-employed, and I consider my media business my main source of income, but I supplement that with several side gigs, like renting out rooms in my homes on Airbnb, watching other people's pets through DogVacay, and driving for Lyft and Uber. That's three extra sources of income right there, but I'm always eager to find more ways to make money.

I feel personally satisfied when all my bills are paid on time, money is consistently going to my savings account, and I'm cash-positive enough to enjoy life the way I want to. If you can't seem to get ahead, use your resources and carve out time to make more money. You'll achieve your financial goals and alleviate the burden of debt faster, and that can only lead to good things.

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Guest's picture

Great post! I do these things and it is not as hard as it seems. Treating savings like one of your bills is so important! My 2007 Sienna died unexpectedly with only 92,000 miles on it. However, since we have been steadily putting money into our "car fund" for years, I am planning to pay with cash to buy a slightly used car. I am a SAHM, but my "job" is to stretch my husband's salary as far as I can! It CAN be done!

Guest's picture
AJ Money Matters

These are such great saving practices! When I first moved out of home, my dad taught me to save 10$ of your paycheck and to always pay yourself first no matter what. I've been doing this for years and find this is another great strategy to really save up. Gives you a sense of control as well.