One of the problems with staying debt free once you have made solid progress is that it can be tempting to slip back into your old ways. In reality, debt is more of a symptom than a problem.
The real problem might actually be how you manage money.
Debt as a Symptom of the Problem
While paying down your debt is certainly a good goal to have, and your financial situation can improve when you get rid of your high interest debt, you also need to honestly evaluate your circumstance and ask why you are in debt.
Have you had problems tracking your spending in the past? Do you have a hard time waiting to buy things that you want? When something breaks, do you have an emergency fund that you can turn to in order to avoid using the credit card? What about insurance? Do you have adequate protection for your assets so that you don’t end up completely devastated by setbacks?
Debt isn’t the problem. It’s often a side effect of how you have been handling your money.
In order to really break out of the debt cycle, you need to address the underlying issue, and change the way you interact with money.
Stuck in the Debt Cycle
One of the biggest issues is being stuck in the debt cycle. This is often exemplified by efforts at debt consolidation to get rid of obligations. While debt consolidation can work for some people, if you haven’t reined in your spending and changed the way you do things, all debt consolidation will do is add to your debt.
So, you’ve consolidated all your debts with a loan. Now, all your credit cards are paid off, and you just have one payment, at a reasonable interest rate. If you have addressed the problem (fundamental money management), then this can work. You pay off your debt and move on to greater financial freedom.
However, if you haven’t changed the habits that resulted in your debt in the first place, debt consolidation probably isn’t for you. Once you have consolidated the debt, you all of a sudden have freed up credit cards. As long as you are still living beyond your means, the debt will start to creep back up on you. In fact, you’ll end up with even more debt, since you have all of the old debt (consolidated) and now you have new debt.
Remain Debt Free
If you want to stay debt free for the long haul, you need to fix the problems that led to the situation in the first place. Even if your debt is largely the result of a catastrophe, such as job loss or expensive medical bills, it’s possible to move forward while taking steps to fix the problem. You can attempt to get better insurance, as well as build up an emergency fund so that financial setbacks aren’t as problematic. You can acquire assets and look for alternative income streams so that you don’t rely so totally on a single job.
Moving forward, remaining debt free requires planning and work. And it also means that you have to address real problem, rather than constantly act as if debt is the problem.