3 strategies I use to avoid debt
Want to avoid debt? These tactics have worked well for me.
Some people don’t mind being in debt. But the idea of paying interest just doesn’t suit me. In some situations, debt is inevitable. For example, I have a mortgage because, like a lot of people, I bought a house when it just wasn’t an option for me to buy it outright. And I also financed vehicles with auto loans because, again, it’s a really big purchase. But luckily I have generally managed to avoid taking on credit card debt, personal loans, or other high interest debt. Here’s how.
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1. I stick to a budget
It’s easy to think budgeting is boring, but mapping out my expenses has helped me avoid going too far into expense categories over the years. The result? I stayed away from debt.
If you don’t have a budget and therefore no easy way of knowing where your money is going month after month, you may end up in debt. Take some time to create a budget outlining your expenses and showing their cost. This will tell you if you are overspending in the categories that you can control. For example, you might not have the wiggle room for a car loan or rent payment, but you might be able to spend less on entertainment or another category if it helps you avoid debt.
2. I keep a fully loaded emergency fund
Having money in my savings account helped me avoid debt when surprise bills for things like home or car repairs landed in my lap. If you don’t have an emergency fund, it pays to create one, so that you have a similar cushion and don’t have to go into debt when the circumstances don’t match.
Generally, it’s a good idea to have an emergency fund with enough to cover three to six months of living expenses. But that’s not the kind of money most of us can accumulate overnight. Therefore, do not plan to do it quickly. Instead, start by adding as much money as you can to your savings and gradually increase the time to eventually have the safety net you want.
3. I check my credit card balance every week
Many people don’t check their credit card statements until their bills are due. But I like to check my balances every week. This way, I can see if I spent too much in a given week, or in a given category.
Suppose your budget allows for $ 300 per month in entertainment. If in the middle of the month you’ve spent $ 250, you know you have to be careful the rest of the month to avoid going into debt. But you might not realize you spent that $ 250 unless you check your credit card statements.
By the way, checking your card balance weekly can also alert you to fraud. If you quickly spot something suspicious, it may be easier to resolve.
Accumulating debt usually means losing money by paying interest – money that might otherwise go into your savings or help you achieve other important goals. These strategies have worked well in helping me avoid debt. Give them a try and they can also help you stay away.