Money is a tool to help you achieve the kind of life you want but debt can hold you back tremendously. Even though mortgage loans, car payments and credit cards are almost a necessity in the lives of most people today, minimizing debt in in everyone’s best interest. Here are helpful tips and strategies on how to avoid getting into debt.
1. Stick to a budget
To avoid overspending, ensure that you create a budget and stick to it. To create a realistic budget, list out all your expenses and be sure to only spend on the listed expenses. After a while, you will realize that you do not even need a budget as you have toned down your spending habits down.
2. Let your income exceed spending
Being in debt means that you spend more than you earn. An effective way to prevent this is to increase your earnings by either starting a side hustle or looking for a higher paying job.
3. Have an emergency fund
Having an emergency fund is a key defense against getting into debt. Financial experts recommend having several months of expenses saved in an emergency fund so as to give you something to fall back to in case of financial crisis.
Saving might be difficult when paying off debts but once you become debt free, you should consider starting an emergency fund and save up as much as you can.
4. Get rid of the credit cards you no longer use.
It is best to close credit card accounts that you no longer use to avoid the temptation of using them. However, if you are building your credit, closing your accounts decreases your credit score as the payment history on the closed account is deleted. Therefore, keep the accounts open but cut the card up. This way, your credit limit remains open and you will not have a credit bill to pay monthly.
5. Reduce spending
On the other hand of earning more money, you should also reduce your spending. The best way to achieve this is by staying busy and substituting activities that will cost money with others that will not.
For example, instead of going out for dinner and to the mall, you can go hiking or ride bikes in the neighborhood then end the day making dinner with friends at your place then catch a movie on Netflix.
If you want to be debt free for good, gain control over your spending, stay motivated and ensure you have enough saving in the bank.