Want to know how to spend less money on the things you need so you can avoid going into debt?

You’re not alone. According to a 2012 National Survey on Credit Card Debt, 40 percent of lower-to-middle-class American households that were carrying credit card debt use credit cards to pay for everyday living expenses.

Many people are painfully aware that too much debt is devastating. You shouldn’t be condemned for what seems like forever because of your debt. Let’s face it: one missed payment can create a downward spiral that may include late fees, higher interest rates, and the dreaded calls from debt collectors.

Learn the ABCs of Debt-Free Living

Debt-free people stop the downward spiral of debt payments by transforming their buying and spending habits. You can do it, too; it just takes patience, practice, and discipline. Getting out of debt isn’t a piece of cake, but it can be as simple as learning the ABCs. Learn how to spend less money and apply the three habits of debt-free people.

A: Allocate Your Cash

In short, have a spending plan. Oftentimes, budgeting gets a bum rap because it feels restrictive. Instead of budgeting, allocate. You need to make a goal for your money. It should work for you, not against you. Match your income to your expenses, needs, and financial goals. Use this expense allocation guide from CNN Money to learn how to allocate your monthly income to your expenses:

• Housing and debt 30%
• Taxes 25%
• Insurance 4%
• Savings and investments 15%
• Living expenses 26%

B: Buy to Save, Not to Spend

We all need to buy things, and debt-free people shop smart. They buy to save, instead of shopping to spend. Spending decreases your cash, but shopping smart helps you decrease your cash less and increase your savings more. When you shop, make sure that you are really saving money and not overspending because you think you’re getting a good deal.

Here are seven ways to shop smart:

• Shop with a list.
• Investigate and take advantage of opportunities to save, such as daily deals, coupons, discounts, and special offers.
• Buy store brands instead of name brands.
• Buy off the rack instead of custom.
• Shop at discount stores, wholesale retailers, and warehouse clubs.
• Buy in off-seasons.
• Buy things of good quality, and buy used when possible.

C: Use Cash instead of Credit

Debt-free people use cash instead of credit to make purchases. It’s easy to spend money that you don’t hold in your hands. Remove the temptation by replacing your credit and debit cards with your hard-earned cash when you make purchases. You’ll reduce the likelihood that you’ll go into debt. According to a Dun and Bradstreet study reported in Forbes, people spend 12 to 18 percent more when using credit cards than when using cash.

Some people relate debt-free living to dieting because they think it will limit their choices. This is not how you should think about budgeting. A well-planned budget is freeing, and following it becomes easy with practice. You’ll have to get used to hearing the sound of cha-ching as your savings add up. What will you do with all that money?

Image source: Wikimedia Commons

[cf]skyword_tracking_tag[/cf]