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After Debt: 5 ways to stay debt free

By Kristen Buford on July 24th, 2007 • Budgeting, Debt, Debt Management

Congratulations! You're finally free of your credit card and other nasty forms of debt. But before you go shopping, check out these strategies to make sure you can enjoy your new-found freedom from unhealthy debt for longer than just the weekend.

1. Keep your focus. If you've managed to pull yourself completely out of debt, chances are you probably already know how to follow through with a budget. Your next challenge is to maintain a carefully planned budget long-term, even though you now have more cash to go around. Getting out of debt and staying there is much like losing weight and then maintaining that new healthier lifestyle. Once credit card debt is out of the picture and your accounts are in the black, healthy spending habits need to become a natural part of your money psyche.

2. Keep your limits on small daily expenses. Cutting back on eating out was a great idea when you were fighting debt, so don't go crazy once you're out of the hole. The same goes for entertainment and other activities you can control.

3. Pay as you go. If you use a credit card, charge only what you are able to pay off in full each month. Limit yourself to one or two credit cards, and make sure they have low interest rates, and few or no fees.

4. Get ahead. To stay out of the debt trap, it is crucial to save in advance so you can pay up-front for large purchases or emergencies.

5. Reward yourself. Hey, you did it! You're out of debt and done paying off your past. Before you buy a new TV to celebrate, consider starting to seriously invest instead–something that is hard to do while you're paying off high-interest debt. Spending highs will be replaced by savings highs, and the rewards will last a lot longer.

The Bottom Line

In 2006, the average credit card holder carried more than three open credit cards at a time, and had a monthly credit card payment of $538. The good habits that got you out of debt can keep you there--and you've now got $538 to invest every month.

Sources: nationalscoreindex.com; thebeehive.org; moneycentral.msn.com; post-gazette.com; wachovia.com

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