Last updated : Monday, March 7, 2011

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How to Live Without Credit

It may seem hard at first, but living without credit can put you on the fast track to financial success. While it’s good to keep one credit card in case of emergencies, refraining from regularly using credit will help prevent you from racking up debt while staying within your means. It will also allow you to keep better track of your spending and accomplish your financial goals without the hassles of having debt building over your head. Living without credit isn’t about sacrifice--it's about prioritizing. So here are some tips to make prioritizing your purchases even easier than pulling out that charge card.

Wait to Make Purchases
Whenever you get an urge to buy something, write it down on your wish list and walk out of the store. Eliminating “impulse purchases” will immediately decrease your spending, and waiting a month before you buy non-essential items means that they are much more likely to be on sale or reduced in price. When you revisit your wish list later, you’ll be surprised how many things that made you say “I have to have it” in the store will make you go “eh” later on.

Track Your Spending
Who hasn't checked their bank balance and wondered, “Where did all my money go?” By writing down how much you’ve spent (and on what) each day, you’ll make sure you’re saving your money for items you really want, like that new dishwasher, rather than ones you buy out of habit, like that cup of coffee on your way to work. This can take some getting use to if you’re used to charging items you otherwise wouldn’t be able to afford. You may find that you need to make some sacrifices like cable TV, dinners out, or even exchanging personal car usage for public transportation.

Set Goals
What are your financial goals? By tracking your spending and decreasing credit card usage, you’ll now have a better chance than ever before of achieving your short-, mid-, and long-term goals. Short-term goals (goals you hope to accomplish within one month to one year) may include things like birthday and holiday gifts, family vacations, and paying off a credit card. Mid-term goals (goals you hope to accomplish within one to five years) may include paying off a car loan, remodeling your kitchen, or saving for orthodontic work. Long-term goals (five or more years) include things like buying a house, putting your child through college, or saving for retirement. Once you’ve written down your goals in each of these categories, go back to your spending tracker and examine how your daily spending habits impact your goals. Make changes where necessary, and make sure to track your progress to keep yourself motivated.

With a little work, your credit-free lifestyle will ensure you don’t end up in an inescapable debt spiral. When buying big-ticket items with money you’ve saved rather than with credit, you’ll have little anxiety about spending because you’ll know you’re spending on something you’ve taken the time to think about and that you can afford. Soon, you’ll find that having money saved when you need it is a lot more satisfying than the false purchasing power of a credit card.

For more tips on personal finance, go to the At Home section.

Clarky Davis is a debt management expert with more than 10 years of personal and professional experience. As The Debt Diva she offers financial fitness education and "real world" money saving tips to help consumers trim their spending in just about every area of their lives. As The Debt Diva, Davis has appeared on "ABC News Now," "Fox Business," "Fox and Friends" and "Nightline."

 

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