It’s so easy to pull out the credit card, apply for a loan, go with the financing option on a car or other large purchase. It’s not really money, many think. But hard earned money has to pay the bills, and all money borrowed—whether it’s a line of credit or an interest rate that is applied when an item is not paid in full up front—is bill that must be paid.

Are credit cards debt? Absolutely. Debts include, but are not limited to, credit cards, car loans and leases, mortgages, and student loans. They are burdensome liabilities with sometimes overwhelming monthly payments. The more debt you have the longer it takes to pay them off. Can you be debt free? Yes, that should be the goal. Follow this advice for financial freedom.


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  • stop spending
  • know your spending habits and weaknesses
  • know current credit score
  • use cash as much as possible
  • develop a Zero Debt plan

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  • take credit cards to the store
  • overspend on a car
  • finance all college costs
  • take distributions from retirement funds
  • overspend on a home


Do stop spending

The first and most important way to reduce debt is to not incur any more. That makes sense, but can be so hard to do. It takes hard work and dedication to condition oneself to stop and think before making a purchase. Ask yourself if something is truly needed or simply wanted. Is it needed ‘now’? Oftentimes, a waiting period makes that decision. Stop, ask the question, then walk away. Was it really needed? Repeat with all potential purchases and watch unnecessary spending decline and debt decrease.

Do know your spending habits and weaknesses

Get in the habit of reviewing all credit card and bank statements—not only for accuracy—but analyzing where, what items, and frequency of particular items purchased.

• Too many dinners out? Cook at home. It costs less. Cook larger portions and freeze the extra for future meals.
• Too much clothes shopping? Buy off season, buy high quality, and try consignment or thrift shopping at a fraction of retail.
• Too much entertainment out? Establish family nights at home. Play games. Invite friends over for a movie night with popcorn.
• Too many vacations? Plan less-expensive trips. Go for a weekend instead of a week. How about local places of interest instead of Europe or Asia?

Imagine the savings from following just these few suggestions. Analyze those credit card and bank statements thoroughly, cut back on how much you’re spending in general, and cut back even more (even to zero!) on how much you use your credit card.

Do know current credit score

Credit scores are so important to one’s financial well-being. All debts are recorded to credit reporting agencies. Too much debt can limit future borrowing for a home, car, or even a job.

Get your credit reports from the three primary agencies, and identify any errors on each report and notify the consumer reporting agency. They must investigate, correct, or delete inaccurate information.

Get another report in six months to track the progress in reducing debt. Everyone can receive a free credit report every 12 months, so you will probably have to pay for your 6-month check-in. This is worth it as you try to improve your score. A decrease in reported debt from the agencies and a better credit score can be very encouraging. It may even be the inspiration to double efforts on the way to zero debt.

Do use cash as much as possible

Live within—and below—your income. Save up for purchases. No money means no purchase. Avoid the ‘instant gratification syndrome’ where an item is needed now. Most times your credit card is used at this moment of weakness. Oftentimes, after a credit purchase, there is buyer’s remorse or guilt over the purchase. Pay cash and experience the satisfaction of outright ownership of items.

This is also a valuable lesson for children. It shows them the value of saving for something they want as well as the value of money. Money doesn’t grow on trees or spit out of an ATM. This prepares them for life in the real world.

Do develop a Zero Debt plan

The analysis of credit card purchases show what items are targets for remediation.

  1. Stop taking on more debt—including loans, using financing options, and using lines of credit.
  2. Pay off credit card debt the fastest by making a list of all credit cards, ordering their interest rates, and minimum payments. Credit card interest rates are almost always the highest in terms of any debt. Make more than the minimum payment on the credit card with the highest interest rate first, as the additional amount will go to reduce principal. Then, when the card with the highest interest rate is paid off, go to next highest until they all have a zero balance.
  3. Keep paying the minimum on all other credit cards and loan payments.
  4. After paying off your credit cards, go after student loans (or the next applicable debt) applying the same principle of paying off the highest interest-rate loan faster by paying more than the minimum monthly amount.
  5. Consider a temporary part time job to pay off the debt.

Not incurring more debt and paying more in principal is a good start to becoming debt free.
This will take time, perseverance, but well-worth the effort to financial freedom.


Do not take credit cards to the store

There is joy in window shopping, especially when the intent is to look and not buy. A shopping experience does not have to be a race to see how many bags one can carry from the mall. This can be the opportunity to see the trends, colors, and styles. Then when you are ready to make a purchase, you have already done your homework. Hopefully that purchase will be at the end of a season when there are terrific sales. How does 75% off feel?

Do not overspend on a car

Cars are for dependable transportation for work, carpooling kids, recreation, and errands. There are so many choices, and that doesn’t include make, model, color, options, buy or lease, new, or pre-owned. To buy new is probably the most important financial decision. Once a new car leaves the showroom, it depreciates in value immediately.

A basic rule to accumulating wealth is to increase assets. Buying a new car violates that rule. Leasing a vehicle creates a liability. A basic rule for accumulating wealth is to reduce liabilities. Leasing violates that rule as well.

Most people need to finance large purchases, and a vehicle is one. The basics are like any other purchases: shop around for the best price. Compare the prices of similar vehicles of similar quality (dependability, safety, needed space and seating, etc.) and accessories. Once price is established, shop around for best financing.

There are financing options other than the manufacturer’s. Ask for all the fees associated with the manufacturer’s financing. What is the pure cost (interest and principal) over different number of years? Compare this with credit unions, banks, and private financing.

And whenever possible, pay with cash.

Do not finance all college costs

It doesn’t matter matter whether it’s an Ivy League or a community college—parents and students have financing options. Speak with the financial aid officer. Fill out the state or federal financial aid forms regardless of income. It is well worth the effort because each college has their own way of determining need. There could be grants or scholarships (school, civic organizations) available as well. The student should be involved in the process and what their contribution would be. Small part time work during the year and steady jobs could pay for additional personal needs for the year.

Do not take distributions from retirement funds

Retirement asset such as 401(k)s, IRAs, 403(b)s, TSPs are not slush funds or emergency funds to pay down debt. These assets are for retirement years. Do not sacrifice your future retirement years for present day needs. These funds are growing tax-deferred. No better reason to keep it in a tax advantaged investment. If taken as distribution, it will be taxable at ordinary income tax rates. There is also a 10% penalty if distribution taken before age 59 ½.

Borrowing from a retirement fund through payroll deductions is permissible. Some would argue that you are paying yourself back. The amount borrowed is not available for growth. This lost opportunity will take much longer to recoup—if ever—because of the time value of money. Payment repaid back would be available for growth, but has lost time’s compounding effect.

Do not overspend on a home

It should be a wonderful and exciting experience to own a home. Although, often it’s a nightmare. Was it love at first site for that mansion? Yes. Eyes bigger than your budget? Yes. Even if the principal, interest, and insurance are affordable, there are variable costs associated with a large home. Some of these higher costs are real estate taxes, electric, heating and cooling, landscaping, and cable. What do all these have in common? Costs almost always increase with square footage.

Calculate these variable costs: What would need to be given up to maintain your mansion? Would that be an option? Would it be a struggle to maintain it? Would the anxiety and stress on you and your family be worth it?

Living at or below one’s means is a premise to keep debt to a minimum as well as building your wealth. Look for the lowest interest rate, put 20% down and the shortest term possible. Pay additional towards principal every month. Trading up is always an option as equity builds, but stay within the budget.


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It is so easy to incur debts, but it takes planning, sacrifice, commitment, and perseverance to reduce or eliminate that debt. It is a behavior modification technique that can change one’s view about debt, and how that positively impacts the individual and family. Stop spending on lines of credit or loaned money, and stop spending your money on unnecessary things. Then pay off the debt you have incurred until zero debt achieved.