5 Habits to Change Before You Get out of Debt

Prepare yourself for a debt-free life

Going from deep-in-debt to debt-free isn't a quick or easy process, but it's doable. It starts with changing the way you think about debt. If you want to get out of debt and stay out, these are some things you must do.

Face Your Debt

Doctor checking currency notes with a stethoscope
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Start by figuring out where your debt stands. One of the quickest ways is to calculate your debt-to-income ratio, a number that tells you how much of your income goes toward paying debt. High debt-to-income ratios indicate that you're overwhelmed with debt. You might not need a calculator to tell you that, but seeing the facts and figures will help you come to terms with how much debt you really have.

Stop Taking on New Debt

One of the hardest habits to break will be the habit of using your credit cards. If you've been using credit for ​a while, you've undoubtedly gotten used to the convenience of delaying payments and buying things you don't have the cash to pay for. If you want to become debt free, you have to stop taking on new debt and start living solely on your own income.

Start a Budget

A budget is simply a plan for spending your money. If you don't have a plan for your spending, you might as well toss your money into the wind. You may feel like you're doing fine managing your money without a budget, but you probably wouldn't be in debt if that were true. A budget will help you make the best use of your income, find leaks in your spending, and put together a plan to pay off your debt. The sooner you create a budget, the better your wallet will feel.

Live Within Your Means

Many people wind up in debt because they spend more money than they actually bring in. Theoretically, it sounds impossible, but if you factor in credit cards and loans as spending instruments, you'll see how easy it is for your spending to exceed your income month after month.

If you want to pay off your debt, you'll have to reduce your spending below your income. That may mean cutting out some frills, but you'd be surprised at how quickly and easily you can adjust your lifestyle.

Avoid Disguising Wants as Needs

It's easy to convince yourself that you "need" to purchase a new tv or that you "need" to go on vacation. The truth is, there aren't that many true needs in life. You need food, shelter, clothing, transportation, and things like that. You want steak, a nice house in the suburbs, designer labels, a luxury car, and so on.

Part of living within your means involves saying "no" to things to some of those nice-to-haves that stand in the way of your debt-free life. It also means avoiding the tendency to call something a need when it's really just a want.