How to Stay Out of Debt in the Future

Any consumer who is struggling with debt knows and understands the crippling hold it can take on someone's life. If you are looking into your options for debt reduction, it probably means that you are ready to take a serious and honest look at your finances, and set up a plan for getting out of debt permanently. Debt consolidation loans are one of the most common tools used by consumers who want to self-direct their debt reduction process. But it doesn't end there. Once you open your debt consolidation loan, you'll also need to be prepared to change your spending and saving habits to protect yourself for years to come. Be sure to heed these steps as you move forward.

• Get your credit report: One of the best things you can do as you assess your finances is review your current credit report. Look over all of the information, and verify that it's accurate. If something looks wrong, find documentation to prove it and/or call the credit bureau and creditor immediately. An error in your credit report can damage your credit score. Additionally, look over all of your existing accounts and take an assessment of your debt - and your available credit. Your consolidation loan will help you get out of debt, but it's up to you to stop the process of racking up high credit-card balances.
• Set a budget: Become obsessive about your monthly budget. Write down your necessary expenses - rent/mortgage, car payment, utilities, et cetera - and then set limits for other expenses - food, entertainment, gas. Resist the urge to splurge on extras, such as $4 cups of coffee each morning, or dining out multiple times a week. Set restrictions so you live within your limits - but still enjoy your life.

• Start saving: One of the best ways to stay out of debt is to switch your priorities. Instead of spending the money you make, save it. Open a savings account and have automatic deposits placed into it from each paycheck. Your payroll department will help you do this. Look into your company's retirement plan, and increase your 401(k) (or similar account) deposits. Start thinking about the future, instead of diverting your money to paying off purchases you made months, or even years, prior. You'll find that in time, you'll be more interested in how much you've saved instead of how much you spent.
• Freeze the credit cards - literally: One old-school, but extremely successful, way of prohibiting yourself from using your credit cards is to put your credit cards on ice. Get a freezer-safe container, fill it with water and your cards, and stick it in the freezer. In the event you absolutely, positively need your credit cards, you can thaw them out over a few hours. But you won't have them available for splurge purchases - where we often make our biggest mistakes.
• Don't open up new accounts: Your credit rating will suffer if you start closing your accounts, so keep everything you can in good standing. But don't think it's OK to start opening up more and more credit-card accounts. It can hurt your credit (because it shows you have a hard time spending within your limits), and will make it too tempting to get in debt again.