Do you always find yourself with outstanding debts despite trying as much as possible to avoid them? And do these debts give you sleepless nights as you try to figure out how to avoid them? No need to worry – with the right knowledge about financial spending, you can avoid them easier than you think. The truth is no one wants to fall into debt, but once you get comfortable with it, it becomes a bad habit that seems difficult to recover from. Unfortunately, most people don’t know how to handle their debt problems, but with the right tips, you can easily conquer the problems.
Here are five tips on how to avoid debt:
1. Create a Monthly Budget
One of the main disadvantages of using a credit card is that it allows you to buy things on credit, which can significantly increase your debts. Always ensure you have a monthly budget and restrict your spending to it. If you can’t seem to avoid impulsive buying, it’s wiser to stick to cash payments or stick to a debit card.
2. Start Saving
Saving is an important cycle of life, and no matter how much you earn, you should always strive to save at least a tenth of your salary monthly. This money can be transferred to a savings account on a monthly basis, and you can later use it to buy whatever you’ve planned for instead of applying for a loan. In addition, you can establish a starter emergency fund to cover emergencies.
3. Avoid Living a Lavish Lifestyle
Lifestyle inflation can lead to bad debts; there’s no need to upgrade your phone, car after every two years, or buy a new house after every five years if your current phone or car is functioning properly. This notion of wanting to upgrade might drive you to acquire loans for purchasing items you already have.
4. Always Pay Your Bills on Time
One of the best ways to preserve your credit rating is by ensuring that you pay your bills on time. Paying your bills late will not only lower your credit score, but it will also attract penalties. These penalties translate to more debts, which could have been avoided if you had paid your bills on time.
5. Track Your Finances Using Financial Apps
Once you’ve planned your monthly budget, you need to automate your tracking using tools such as Mint and Penny. These tools help you plot out your expenditures and stick to your budget without any headaches. The more you get used to tracking your daily spending, the easier it becomes to avoid impulsive buying, which leads to debts.