8 Simple Ways to Live Without Credit or Debt

Last month Zen Habits had an article 10 Ideas for Living a Life Without Credit or Debt. Ever since reading that post, I knew I needed to make my own post on this subject, but I never seemed to be able make the time to do it. Finally, this weekend, I bit the bullet and made time. In between doing errands and attending the Sertoma Clubs annual "Great Topeka Duck Race."

1. Save an emergency fund.
This is Dave Ramsey's #1 item and it is an important part of becoming debt-free. If you don't save that $1000 emergency fund, then Murphy will visit and you will be tempted to go back/deeper into debt to hand something you should of planned for.
Look we all know things happen, all we are doing here is preparing for the unexpected. Unexpected expenses really aren't unexpected, because you know it will happen eventually.

2. Save for goals.
Dave Ramsey says this is important to, but this savings should come after you are debt-free. You want to take that dream vacation. Or, buy that jet ski, or whatever dream item is. So save for it, so you NEVER have to borrow again.

3. Get a debit card.
OK, so you have cut up your credit cards, but the airline wants a credit card to reserve those plane tickets. What do you do? Well you could have them put the ticket on hold and mail them a payment or drive down to the airport to pay cash, but why? When you can get a debit/ATM card from your bank with a credit card logo on it. The debit card works just like a credit card, as long as you have the money in the bank.

4. Earn interest instead of paying it.
Hey, now that you have dumped the debt and saving to pay cash for everything, you can collect the interest. Doesn't it feel good to see your money collect interest, instead of paying the banker?

5. Buy a car on cash.
This one ties in with number 2. This may seem impossible, if you have been buying vehicles with auto loans all your life, it may seem impossible to buy a car on cash. But it’s very possible, and a lot of people do it.
Instead of making loan payments, and paying double the price of the car or more over the term of the loan, the idea is to make savings deposits, and end up with the amount it costs to buy two (maybe 3) cars in the bank over the course of 5 or 10 years.
In fact, after you have saved this much money, if you will keep your car until you drive it into the ground (or at least 10 years) then you probably can sit back and not pay into the account again. Watch as the interest compounds and builds up the account even bigger, even as you take the money out to buy that first car with cash.

6. Invest for retirement.
Here, is another item that is just plain to important to ignore. You must save for your retirement, unless you want to spend your "golden years," working at the "golden arches." I don't know about you, but that is not something I want to do. I want to enjoy my life when I retire. Like Dave Ramsey says, live like no one else (now) so you can live like no one else (in the future). The idea is simple. Instead of spending all your money now, save it, so in the future you can have money to anything you want.

7. Travel without credit.
Since you have cut up your credit cards, you may think you can't rent a hotel room or a car. This can't be farther from the truth. Hotels will take cash deposits. Some that don't require deposits, will hold you a room until 6 pm (varies - but in most cases is the time). If you fail to arrive by that time, you can lose the room. As for car rentals, I have only found one company that would not accept cash or debit cards, and they are the most expensive rental company anyway.

8. Buy a home without credit.
Again, this may seem harder to grasp for some people, but it is possible. Buying a home is smarter then renting financially, but not if have to borrow and pay 2 to 3 times more then the cost of the house. Yes, the interest over 30 years will actually tack on that much extra.
Something else to consider is buy smaller to begin with and sell and along with additional money saved move into a bigger home. Fact is many people just buy to much house to quickly.