Our goal is to share information and products that are truly helpful to renters.
If you click on a link or buy a product from one of the partners on our site, we get paid a little bit for making the introduction. This means we might feature certain partners sooner, more frequently, or more prominently in our articles, but we’ll always make sure you have a good set of options. This is how we are able to provide you with the content and features for free. Our partners cannot pay us to guarantee favorable reviews of their products or services — and our opinions and advice are our own based on research and input from renters like you. Here is a list of our partners.
5 habits for staying out of debt
Staying out of debt lowers your stress level and improves your quality of life
Being in debt is stressful, so staying out of debt can help your mental and financial health while also providing you with more options and flexibility. How? If your finances are healthy, you are more likely to be able to rent an affordable apartment, secure lower interest rates, expand your job opportunities, and sign up for utility services without a deposit. You may even get lower insurance rates with good credit.
Since your credit history and debt impacts nearly every aspect of your life, building up your debt management skills will serve you well. Taking a good look at your spending habits and how you use credit can help you better weather unexpected situations and take advantage of opportunities as they arise.
Build up your savings and fill your emergency fund
Very few people intentionally choose to take on expensive debt. It’s usually the lack of an emergency fund paired with an unforeseen circumstance such as a medical issue, pet illness, car repair, or job loss that forces someone to rely on credit. And this situation as actually pretty common: According to a Bankrate survey, nearly 40 percent of Americans cannot afford a $1,000 unexpected expense.
Working to build up an emergency fund can help you avoid getting in a tough financial situation. Most financial experts recommend that you save up to three to six months worth of expenses in your emergency fund. How many months of expenses you may need to save should be increased if you predict it would be difficult to replace your income. If you have a partner who you share expenses with, both of you should have an emergency fund saved.
To calculate how much you need to save, add up your monthly payments, including rent, installment payments, utilities, gasoline, insurance, and food expenses. Multiply that total by the number of months you wish to save, and for good measure, round the number up.
Create a budget and repayment plan
About two-thirds of Americans don’t know how much they spent last month. However, many of them wished they had spent less. To wrangle your finances and manage debt, you need to create a budget that includes a plan to pay down debt.
While you can use a simple spreadsheet to create your budget, you may find it easier to use a budgeting app like Mint, YNAB, or Wally. These apps are low-cost or free. Some apps help you track your spending and budgets. Others like YNAB help you build your emergency fund. Your bank may also offer a free budgeting tool.
When creating your budget, make sure to assign where “extra money” may go. The money you receive outside of your regular income includes gift money, overtime, item sales, or tax refunds. Before you receive extra money, you should decide how you are going to spend it. Most recommend that part goes to paying down debt and part to building up savings.
Examine your spending habits
If you make enough money to pay your bills but are still living paycheck-to-paycheck, consider if there is anything you can do to further improve or optimize your spending. Not that many people go on a massive shopping spree at 2:00 am every morning. Instead, there are probably a series of small actions you can take that will add up to something pretty helpful.
To identify your spending habits, review your transitions for the past several months. Are you splurging on the weekends or paydays? Do you make a lot of convenience purchases? Are you paying late fees?
15 ways to help you change your spending habits:
- Create a budget and stick to it
- Leave your credit cards at home
- Disconnect your credit and debit cards from online buying sites
- Remove buying apps from your phone
- Let items sit in online carts for a week before making a final buying decision
- Take a break from online advertising and influencers
- Avoid convenience food buying by keeping a few quick items at home and work
- When going out with friends, carry cash and limit yourself to that amount
- Learn to budget shop for necessary items
- Find and follow a good personal finance group
- Before making a purchase, ask yourself if you are buying for emotional or peer pressure reasons
- Negotiate lower monthly payments
- Consider quality over quantity
- Estimate how many hours of work it takes to buy an item. You may decide an hour of your time is not worth a lunch out
- If you feel pressured by family, learn how to say no
While sticking to a budget and decreasing your spending can help you greatly improve your financial situation, don’t budget so tightly that you feel like you can’t participate in activities that you enjoy. Include some “fun” money for vacations, going out to dinner, or other events in your budget.
Strategically use credit cards
You may have heard something like, “you have to have credit to get credit.” While mostly true, you do need to be strategic about credit spending in order to avoid debt. Overall, your goal is to pay the credit card balance every month. This can help you build credit and earn up some pretty good credit card points or rewards.
Using rewards cards
Cards that offer travel points or cash back are useful. However, it is best to only use them for items you would buy anyway and pay the full balance every month. A helpful note: The rewards you earn need to exceed any annual fees the card may charge. Otherwise, this is just another expense.
Sometimes you can save money by transferring a credit card balance to a zero-interest credit card. If you do this, make sure to pay the balance offer before the introductory 0% APR period is complete.
Keep utilization below 30 percent and set up auto payments
If you carry a balance, keep your utilization to under 30 percent of the available credit. For example, if your available credit on a card is $5,000, keep your balance under $1,500. If you set up automatic payments, you don’t have to worry about late fees.
Protect yourself using a credit card
Credit card services can help protect you. They offer fraud protection. Often they are required for making reservations and renting vehicles. Many also provide protection when traveling abroad.
If you are a college student, check out the best credit cards for college students.
Purchase a good health insurance plan
The number one reason for bankruptcy is medical debt. While you will not see this suggestion in many “financial habit” lists, it is critical if you are aiming to avoid unplanned expenses. In the past, many employees received good health benefits as part of their employment package. Nowadays, this is often no longer the case.
Gig, contract, and freelance workers most often do not receive health insurance benefits, making them vulnerable to large medical expenses if they do not have coverage.
If you choose not to purchase health insurance, at least work on funding an emergency fund to cover unplanned expenses. The average cost of an emergency room visit in 2021 ranges from a few hundred to a few thousand. Uninsured persons should put aside at least $5,000 for unplanned medical expenses (assuming they do not have ongoing medical needs).
The average cost of health insurance in the US is about $500 per month. If you are looking to purchase insurance, carefully review co-pays, deductibles, and out-of-pocket maximums to evaluate the total cost of the plans. Review your state’s tax laws to see if any tax penalties may apply for not having coverage.
Building healthy spending habits help you stay out of debt. If you’ve made financial mistakes in the past, you can fix them. Learn more about paying off debt.
Your renters rights, in your state.
Explore what you need to know.
- Alabama Renters Rights
- Alaska Renters Rights
- Arizona Renters Rights
- Arkansas Renters Rights
- California Renters Rights
- Colorado Renters Rights
- Connecticut Renters Rights
- Delaware Renters Rights
- Florida Renters Rights
- Georgia Renters Rights
- Hawaii Renters Rights
- Idaho Renters Rights
- Illinois Renters Rights
- Indiana Renters Rights
- Iowa Renters Rights
- Kansas Renters Rights
- Kentucky Renters Rights
- Louisiana Renters Rights
- Maine Renters Rights
- Maryland Renters Rights
- Massachusetts Renters Rights
- Michigan Renters Rights
- Minnesota Renters Rights
- Mississippi Renters Rights
- Missouri Renters Rights
- Montana Renters Rights
- Nebraska Renters Rights
- Nevada Renters Rights
- New Hampshire Renters Rights
- New Jersey Renters Rights
- New Mexico Renters Rights
- New York Renters Rights
- North Carolina Renters Rights
- North Dakota Renters Rights
- Ohio Renters Rights
- Oklahoma Renters Rights
- Oregon Renters Rights
- Pennsylvania Renters Rights
- Rhode Island Renters Rights
- South Carolina Renters Rights
- South Dakota Renters Rights
- Tennessee Renters Rights
- Texas Renters Rights
- Utah Renters Rights
- Vermont Renters Rights
- Virginia Renters Rights
- Washington Renters Rights
- West Virginia Renters Rights
- Wisconsin Renters Rights
- Wyoming Renters Rights
- Washington, D.C. Renters Rights