7 Tips for Staying Out of Debt

In this article I’ll provide 7 tips for staying out of debt based primarily on my experience. If you want to be proactive and ensure you prevent yourself from going in debt follow these 7 tips.

1.) Minimize Your Spending with Wise Decisions

The most important tip is to stay within your means and not spend too much by making wise decisions. It can be fun to buy new clothes, to go out to eat a lot, and buy electronics but will those items truly add to your happiness? Buying material things may result in temporary joy for some but happiness found from buying a new item rarely lasts for more than a few days. In fact buying more stuff can be associated with depression, anxiety, and broken relationships.

There are lots of peer pressures that are constantly encouraging us to buy new things all the time. For one we all receive a lot of spam emails asking for us to purchase the latest sale item. But buying something you don’t need even at 50% off is not really saving money in the long run unless you were planning to buy the item regardless.

A lot of friends may have apple watches or or the new tech item. Splurging on the newest tech item may make you happy immediately after the purchase or be fun but always giving into the urge of buying the newest clothes and tech item can leave with with little money left over or in debt.

For me personally I try to minimize spending by not always getting the new tech items and by trying not to keep up with other material purchases (clothes, make-up, jewelry, etc.). It’s really hard to build wealth and stay out of debt if you are always trying to stay up to date on current trends.

What are three words that profile the affluent? FRUGAL FRUGAL FRUGAL…..Being frugal is the cornerstone of wealth-building.

The Millionaire Next Door by Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D.

Certainly if it’s really important that you get the newest iphone please go ahead as long as the purchase is within your means then we should all be able to have some indulgences. We just can’t have everything all once and still expect to live within your means.

Warren Buffet for example, who is known for being frugal, will buy a new car infrequently and when he does he buys a modest car. To learn more about Budgeting and to stay within your means please read How to be a Budget Boss: All About Budget.

2.) Pay Off Your Credit Card In Full Every Month

Credit cards make a lot of their money by charging interest fees from those that keep a balance on their credit card. You don’t want to be the person that is paying fees directly to credit card companies for keeping a balance on your credit card. These interest fees are high. Not only do you lose money from having to pay the high interest rates you also lose money on the opportunity cost of not being able to invest the money.

Average credit card interest rates are 16.13% for the 11th week for the week of Jan. 12th, 2022


In part by following step 1 above and minimizing spending it’ll be easier to pay down your credit card every month.

You can take it one step further by automating your credit card payments monthly. This is what I do to save me time and to make sure I never miss a payment. This has been working for me for years and as long as you review statements monthly to make sure the charges are appropriate it could be a reasonable approach.

Another approach that has been recommended by Dave Ramsey, American personal finance personality/ expert, is to not use a credit card at all. While this approach will certainly work I personally still keep credit cards I just minimize how many I have and always pay them down monthly.

3.) Reduce How Many Credit Cards You Keep

For me personally I have only one credit card which I use for most purchases and it has worked out just fine. I’ve seen many other friends have multiple credit cards that they will use for different purchases to maximize rewards. That approach can also work as long as you make full payments on a monthly basis so you are not paying any interest. I tend to be more of a minimalist and think less is more. Having only one credit card means less bills to remember to pay and less things that I have to worry about. Being a mother of two kids and working full time I already have lots to think about and it’s nice to not have to worry about multiple credit card payments.

I have wondered what happens if something happens to the current credit card that I have. Well this has only happened one or two times in the past 15 or so years and I can tell you that any reputable credit card company will replace your credit card right away if needed. Also I have a debit card just in case and there is always an option to use cash if really needed. Another option is using a prepaid card which will work just as well.

4.) Minimize Any Car Loans

While we all want a nice new car, cars depreciate in value immediately after being driven off the lot. Your cars value will depreciate 20% to 30% by the end of the first year. It would be best to reallocate those dollars to other areas such as investing. It would be great to buy a new used car or see if you can get a car from a friend or relative that no longer wants their car. I understand that especially now with supply chain shortages it’s harder than ever to get a car but exploring other options other than buying a new car can be well worth it.

If you buy a used car be sure to do your due diligence and research in advance. I can give an example when I was in college, yes this was before the internet was widely used at least by my parents, my parents purchased a new used white Toyota Corolla. While I loved the car because it was only a couple of years old and I was one of the few of my friends that had a car to get around UC Berkeley, unfortunately we found out later that the car had previously been in an accident and was not in ideal driving condition. So we learned the hard way it is best to always do your research when purchasing a used car.

If you do plan on purchasing a new car, which can be reasonable if you have managed your expenses in other areas and are living within your means, it is typically best to pay for the car upfront rather than entering a car loan.

5.) Strategically Plan for Any Big Purchases such as Higher Education or Purchasing a Home

For larger purchases like purchasing a home or for your kids college education you’ll want to start planning, saving, and investing years in advance. Taking out debt for college and / or for purchasing a home is okay it is just best to minimize the amount of debt you take on when possible.

Saving for College: For my kids college education I started a 529 college savings plan when my kids were younger. The earlier you start the better as the investments in the account will have time to grow and compound annually. You’ll also have a longer runway to save and invest each month. There are a lot of options for 529 college savings plans and you can learn more by visiting SavingForCollege.com.

A 529 plan is an investment account that offers tax benefits when used to pay for qualified education expenses for a designated beneficiary. I kept it simple and since I live in California I selected a California 529 plan, but please do your research before selecting the plan appropriate for you. What is most important is committing and saving and investing on a monthly basis.

If you plan properly, invest properly, and consistently input funds into a 529 account on a monthly basis having sufficient funds for your kids college education will be more attainable. I’ve automated monthly withdrawals from my checking account to my kids 529 account so I don’t have to remember or think about making this decision. This helps me stay on track.

A lot of parents may consider sending their kids to private school in elementary, middle school, or high school. I personally attended public schools my whole life and if possible would like my kids to continue to attend public schools at least until college.

Saving for a House: If you would like to one day purchase a house then you should save up 20% or more of the down payment of the house. This can take years to plan and save for. You’ll also want to ensure any purchase you make is within your means and make sure your mortgage payment is within 28% or less of your monthly gross income. The 28% rule states that you should spend 28% or less of your monthly gross income on your mortgage payment (e.g. principal, interest, taxes and insurance).

As my family lives in San Francisco the price of homes are very expensive so at this point we have not yet purchased a home, but potentially one day we will purchase a home if we are comfortable that it is within our means and we believe we will remain in the home for an extended period of time (5-10 years).

As you can see larger purchases like college or purchasing a home are big decisions that require strategic planning years in advance to ensure costs are within your budget. The sooner you start planning, saving, and investing for these purchases the better. As long as you start you can always make adjustments and course corrections on your way.

6.) If your Income Increases Continue Living Off Your Lower Wage If Possible

It can be very easy when you get a promotion to start spending up to your new income amount. I have certainly been guilty of doing this especially as after we had children the cost of living increased.

To the extent possible it is best to continue to stay within budget based on your prior income level and to save and invest the additional income. As you continue to move up the career ladder there may be reduced jobs at the higher levels and thus it may be harder to find a job. So it is always better to spend less if possible. The additional savings can go towards other areas such as retirement or saving for an emergency fund (if not already funded).

7.) Save Up for An Emergency Fund

One of the first items to save up for is to have enough savings for a 6 month emergency fund. This should be enough to cover all your living expenses including rent / housing, food, health insurance, and any other variable costs for at least 6 months. You never know what may happen such as losing your job or having to take time to care for a loved one and having sufficient emergency funds is important to be prepared for the unexpected. While I was in my 20’s I ended up taking a couple months off work to study for my CPA test and having some money saved up allowed me to focus on and successful pass my exams.

Sometimes life can be unexpected and it best to be prepared financially in case it is needed.


If you are able to follow the below 7 tips then you’ll be more likely to stay out of debt in the future. Life is an adventure and it is best to be prepared for the ups and downs that way you will be as financially fit as possible.

1.) Minimize Your Spending with Wise Decisions

2.) Pay off your credit card in full each month

3.) Reduce How Many Credit Cards You Keep

4.) Minimize Any Car Loans

5.) Strategically Plan for Any Big Purchases such as Higher Education or Purchasing a Home

6.) If your Income Increases Continue Living Off Your Lower Wage If Possible

7.) Save Up for An Emergency Fund

Have you found any other good tips for staying out of debt? If so it would be great to hear from you in the comments. Hope you have enjoyed the article!

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