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Follow This Simple Rule to Stay Out of Debt

By: David Bach  |  Last Updated: February 23, 2021
Financial Expert & 10x New York Times Bestseller

If you want to build lasting wealth, credit card debt isn’t an option. The sooner you can get out of the red, the better your financial future will look. 

For those of you who are already in credit card debt, follow my six-step action plan to get out of the red. Then, live by this simple principle to stay debt-free for life: If you can’t pay for it in cash, don’t buy it.

If you never carry a credit card balance, great! But continue to follow this rule so you’ll stay debt-free for life.

It’s a simple rule, but you’d be surprised with how many people don’t follow it. It may be easier said than done to adhere to this spending rule during the Covid-19 recession, but please try to only use your plastic to buy things that you know you can pay off immediately.

It makes no sense these days to run up credit card debt. It’s way too expensive. The average credit card interest rate is 16.12% as of February 2021, but rates can be even higher, 25% or more, if you have bad credit. Rates that high can cost you thousands of dollars in interest if you don’t pay off your balance in full every month. 

That’s why I want you to change your mindset and start asking yourself if you can truly afford whatever you’re about to purchase on your credit card. If you come across an item that is too expensive for you to pay for in cash, don’t buy it. 

If you have a hard time following this rule and tend to over swipe, here’s what you have to do:

1. Cut up your cards. If you can’t stop swiping, cut up or freeze your cards — or at least leave them at home whenever you go shopping so you won’t be tempted to use them.

When it comes to everyday purchases, use cash for all of your spending. Cash makes the purchase seem more real. That’s because when you buy things with credit cards, you don’t feel the significance of your spending. Your mind plays tricks on you. You haven’t actually handed over the green stuff, so you don’t quite believe that you’re spending money. 

I dare you to stick $500 in cash in your wallet and try to spend it frivolously on impulse purchases. I predict you’ll have a hard time doing it, because cash makes you think about exactly how much you are spending in a way that swiping a card doesn’t. I can’t tell you how many of my FinishRich readers have told me that when they went to a cash-only system, their spending dropped by 20% in a single month.

2. Delete your credit-card information from your favorite online retailers. These days, it’s beyond easy to spend money without even leaving your house (or your bed!). Sites like Amazon and the rest of your favorite stores remember your credit-card information for you, meaning you’re just one click and seconds away from buying those new shoes or that new gadget you don’t really need.

If you’re prone to spending mindlessly online, take the time to remove all of your credit card information from retail websites. It’s amazing how much money you’ll save when you actually have to think about your purchases instead of mindlessly clicking “buy.”

In short, it’s time to cool it with the credit cards. If you have the discipline to keep your cards handy without overspending, great! If you don’t, it’s time to take action and eliminate the possibility of you even swiping.

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Read next: How To Get Out of Credit Card Debt, In 6 Simple Steps