Stay Debt Free

Live Within Your Financial Means.
Sounds simple and full of common sense doesn't it? Yet so many people have never learned this simple doctrine. Actually, if at all possible, you should live below your means. The best way to generate wealth and/or to stay debt free is to live within or below your means. For example, if you make $40,000 a year, try to live like you make $35,000 a year. Save, pay down your debts, or invest the remainder. So many people with high incomes have spent everything they've made and have practically nothing to show for it. Do not try to compete with your family, friends or neighbors, by spending money fruitlessly. Most importantly, don't spend more than you make. You might be thinking "I'd love to spend less money but I can't. I must pay my car payment, the credit card bills, groceries, I need a vacation, I need new clothes for work, ..." Most of these expenses can be avoided or deferred to a later date when you can afford it. The other expenses, your credit card bills and mortgage, could have been avoided or toned down if you had lived within your means to start with. For example, your car payment would have been less if you would have purchased a used car instead of the new car. Your credit card expenses would be much lower if you hadn't bought that new computer or those 4 pairs of shoes. Even your mortgage or rent could be less if you move to a different location. This being said, there is a fine line between spending within and spending above your means. An easy golden rule to live buy when making a purchase on credit is "Would or could I still buy this item with cash?" If the answer is no then don't buy it. Of course an exception to this rule is buying something that will accrue in value like a house or condo. It's an investment that will add to your future net worth and the interest is tax deductible and you were probably paying rent anyway so it will turn your rent payments into an equity.