7 Tips for Avoiding a Lifetime of Debt

Increasing prosperity and economic growth has paradoxically led to record levels of personal debt. Modern life offers a bewildering array of possibilities for getting into debt — financial institutions make it as easy as possible. But, when you face a mountain of debt, don’t expect much help from them in overcoming the situation.

Debt can bring anxiety, stress and unhappiness; but, by being aware of your financial situation you can enjoy life without permanently battling against the problem of debt. To avoid suffering from serious debt problems consider these suggestions:

1. Buy what you need

It’s easy to buy things we actually don’t need or very rarely use. Look in your wardrobe and count the number of clothes that you rarely wear. Before buying a good, try to evaluate its usefulness to yourself; give it a mark out of 10. If you give items an honest score, you will think twice before spending $100 on your 7th pair of designer shoes. If you’re an impulsive buyer, try waiting a day before buying something. If you really want and need it you can come back the next day.

2. The $70 dollar test

If you have a real problem with excess spending, try this test. For a week, give yourself $70 cash, and put away all credit cards. This forces you to live on $10 a day. When you are faced with a strict income, it forces you to be very careful in what you spend. It will make you realise what is really indispensable and which spending is mere extravagance. This will also force you to be inventive. For example, rather than spending $15 on a take away lunch, you may make your own. Quite often, by taking these steps we realize our previous spending habits were not at all essential to our happiness.

3. How Much do you Spend?

It is easy to forget how much we spend. For example, with credit cards we don’t see the money leave our wallet so it, somehow, seems less real. Most people in debt live in denial at how much they spend on certain items; when faced with their true expenditure it can often be a shock. For example, maybe you get two takeaway coffees per day and one pastry. This can easily add upto $15 a day, which is nearly $100 a week – that’s $5000 a year! We may be reluctant to spend $2000 on a computer because it is a big outlay. But, at the start of the year, would we be so keen to put aside a lump sum of $5000 just for the purchase of coffee and pastries?

4. Tear up Credit Cards.

Credit cards can be useful if you never miss a payment, and pay the balance in full. If you are able to do this then credit cards are working for you. However, if you find credit cards only encourage you to spend beyond your means, consider getting rid of all credit cards, at least for a time. This makes sure that you only spend what you have available.

5. Financial Education

In school we get taught about ancient history, chemistry, and how to differentiate a complex equation; in fact we can learn anything apart from what is important in the real world. If you struggle to grasp the meaning of APR, debt settlements, compound interest, spend some time to learn about the workings of financial issues. At a very basic level, make sure you are aware of how much interest you are being charged and the penalties for a late payment.

6. Manage Debt

If you do have a moderate amount of debt, this need not be a problem. The important thing is that it is managed in a careful way. Make sure you move the debt to the lowest interest paying account possible. For example, if you have debt on a credit card, you could be paying the standard variable rate of upto 18%. Other credit cards may enable you to switch the balance at 0% interest for 6-12 months. By keeping interest payments as low as possible, it enables you to pay money to reducing the amount of debt, rather than just paying interest.

7. Spending does not equal happiness

A growing phenomena amongst shoppers is the idea of “retail therapy” Basically, we get satisfaction from spending money, even if the goods we buy are rarely used. If you rely on spending money to gain happiness, you need to think very carefully about whether this is a good way to get satisfaction in life. This is not to say shopping is always bad; the point is that spending money does not equate to real happiness.

This article was written by Tejvan R. Pettinger. He works as an Economics teacher in Oxford and updates a blog offering advice on debt, finance and mortgages.

42 Responses to 7 Tips for Avoiding a Lifetime of Debt

  1. Dave S. says:

    Great tips! I particularly like number 2. I think I might give it a shot. I really have no idea how much I spend in an average week.

  2. Spend Less says:

    Just stop wasting money. That’s the only tip you need.

  3. wikum says:

    “Economics teacher in Oxford?”

    Not at the University he isn’t.

    Seems a bit false, really.

  4. Dave Dragon says:

    I quit using credit a long time ago, and only have a mortgage under payment.

    -Dave Dragon
    Ride it like you stole it

  5. “Buy what you need” – the most important tip

  6. jtimberman says:

    You forgot one of the most important things:

    Never borrow money for or lease a car, and save yourself hundreds in car payments.


  7. Andy says:

    I wholeheartedly agree with your “financial education” tip. The ability to understand compound interest can make the difference between riches and bankruptcy.

    I was taught about compound interest in school (aged about 13) but I know many of my peers have forgotten that lesson.

  8. Mis i Pile says:

    wikum, nobody said he’s economics teacher in oxford university. If you did a little research on Google (30 sec research) you’d find his short biography:


    which says (quoted): “He now works as an Economics teacher at Cherwell College Oxford.”

    Whoever Mr. Pettinger is, I like some points of this article and it sounds interesting. I don’t care if he’s teacher or not — there’s nothing false in a bit of logical thinking, like these points are.

  9. Danny Haugh says:

    “If your an impulsive buyer, try waiting a day before buying something.”

    If you don’t know the difference between “you’re” and “your,” your advice probably isn’t worth following.

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  11. John Wesley says:

    That’s harsh, Danny ;). I just corrected it. It’s my fault for not catching that when I edited the article.

  12. Thanks for the comments. I studied PPE at Oxford University (Lady Margaret Hall) and now teach Economics to 18 year olds at a private 6th form college, Cherwell College.

    >Danny, you’re quite right about that slip – I hope my students aren’t reading this :)

    Tejvan Pettinger

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  16. TJ says:

    Rather than getting into a cycle of debt and interest .. buying on credit, paying-off, buying again — get into a save cycle.

    Simple example: save $500 once (earning interest), spend it, save $500 again, spend it again. Except for the first cycle, you’ll still be getting $500 of new stuff regularly … and earn interest instead of paying it.

    While you’re saving you’ve got time to be certain you really want a product. You break the impulse-spending habit that ruins so many.

  17. JL says:

    Great article. For those who want to get out of debt, here’s a tip that will save a lot of money:

    Always pay off the principle with the highest interest rate first.

    Putting $100 into paying off debt A ($5000 principal at 5% a month) is smarter than putting $100 into debt B ($500 principle at 1% a month), you’ll save 5% of $100 instead of only 1% that month.

    And ALWAYS put a percentage of your monthly income (10% – 30% of your total) into a “wealth account” that you’re never allowed to withdraw, and invest it. When the investment generates enough money to equal your monthly expenses, you can quit your job. The important thing is to NEVER take money out of the wealth fund NO MATTER WHAT, doing so ruins its power to grow exponentially. I know having tons of money just sitting there is very tempting to spend, but be patient and compound interest will reward you.

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  20. I’m one of those people who consider themselves having no problem with money. I use credit cards like crazy because of all the cash back and bonuses.

    I have to say though using credit does make you spend more. I thought I wasn’t vulnerable, but the extra cash back you get is probably much lower than what would have been saved by using cash.

    Then again, I’m addicted to credit card cash back.

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  22. Sam Smith says:

    Wonderful tips, overall, but I especially agree with #5: Financial Education. I think it should be up to the schools and parents of children to make sure that they’re financially educated. Young adults themselves need to do some financial exploration of their own, as well.
    I think the amount of financial education that kids receive pre-college is way too little. A lot of people’s debt, saving, and tax problems could be solved with some simple education as a requirement to graduating high school.

  23. treadlightly says:

    Danny H., if the advice isn’t worth anything, then do the opposite of what is recommended. I’m sure all of your friends and family will be VERY impressed! 😉

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  30. Jenny says:

    Well written article, you posted lots of great tips! Here’s another article I found on how to get rid of debt

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  32. Andy says:

    In the good old days, it was shameful to be in debt. I googled and found this funny article:

  33. ApplianceFix says:

    Another important tip, avoid extended warranties. These often are not valuable and often expire before you can use them. On most appliances, the manufacturer offers a limited warranty (several months to one year). Consumer Reports did a study and found out most store “extended warranties” go unused or have so many exclusions, it makes them worthless.

    Always read the fine print on anything, and don’t give into high pressure sales pitches.


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  37. Joel says:

    I like the $70 a week idea. I’m going to try that. Also the concept that spending does not equal happiness is so true. It seems like so many people fail to realize that. Super great post!

  38. These are very helpful tips in avoiding so much debt. A lot of people will surely find these measures as effective and useful. Thanks for sharing a very informative article.

  39. Allan Morais says:

    Staying out of debt should
    be the goal of every consumer. This problem can mess up your reputation. Be
    practical and financially conscious so that it won’t lead you to a lifelong
    debt. And if you come to this point, take action as soon as possible.

  40. krista says:

    It’s quite indigenous to work on debt and finish it off totally from our lives. Why people do fall into debt! It’s as simple as they are not able to manage their finances properly. People who are carrying more than one debt should go for consolidation as managing debt separately is quite hindering and one has to face lots of obstacles. Opting Consolidation would be revising your interest rate accordingly and there would be an ease in your monthly installments.

  41. Thank you for sharing these great ideas in avoiding debts.

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