9 Tips to Avoid Getting Into Debt

Almost everyone has faced the problem of debt at some point in their lives. Whether it’s an overdraft charge on your checking account, credit card debt from an emergency purchase or a loan to fix your car, there are plenty of ways you can end up owing money to someone else.

Debt can be a scary thing to go through and, if you find yourself in debt and unable to pay it back, living with the burden of debt truly is an awful situation. However, there are a few steps that you can take to avoid debt in the first place.

If you’re wanting to avoid getting into debt, then this post will give you some simple strategies to use for avoiding debt.  

How to Keep Yourself From Getting Into Debt

1) Create a Budget

A budget can be a really useful tool for monitoring your income and expenses, and you can use it to control your spending. If you know how much you are earning, how much you are spending, and what you are spending money on, you can make better decisions about where your money goes.

If you’re trying to get your finances straight, it’s essential to know where your money is going. When you create a budget, you will know exactly what you can afford each month. 

2) Live Within Your Means

Overspending can get you into trouble. If you’re having financial difficulties because of overspending, more loans or credit cards can intensify the situation because it gives you access to money you’ll have to pay back in the future.

Always make sure you can afford a purchase before you make it. It is dangerous to assume that you can afford something if you don’t actually have the money for it. If you can’t buy it with cash, then you can’t afford it.

3) Limit Expenses That Aren’t Necessary

Many unnecessary expenses can lead to debt. Many unnecessary recurring expenses are not necessary. For example, you could give up cable TV – or at least downgrade to a cheaper plan – cell phones, dining out, expensive hobbies, and other things that aren’t essential. Also, before you go shopping, make a list of what you need. Only buy what’s on your list and not anything more. It’s really important to make sure you spend your money on only what you need. 

4) Don’t Take On More Debt than You Can Handle

When you take out a loan or use your credit card, there is often fine print that tells you precisely what the interest rate will be, any fees that may apply, and how long it will take you to pay off the balance.

You will be in a lot less trouble if your financial situation is due to an unexpected expense than if it’s due to taking on too much debt for things you don’t need. Make sure that the amount of money you borrow or spend is within your means and can be paid back quickly and easily. 

5) Avoid Late Fees

If any of your payments are even one day late, you may be subject to a late fee. The higher the balance is on your account, the more money you’ll owe each month, which means you’ll have less cash for things like groceries and gas.

A simple way to avoid late fees is by setting up automatic bill payments with your bank or credit card company. This will make sure you pay the right amount on time each month, and it’s typically free. If you owe money to multiple companies for things like rent and utilities, make sure that those bills are paid before other expenses like groceries.

6) Learn to Use Cash Instead of Credit Cards

When you use a credit card or even a debit card, it’s easy to spend more than you can afford. A good way to cut back on overspending is by using cash instead of credit cards whenever possible. This will make you more aware of what you’re spending and will help keep you from putting things on your card that you can’t afford or weren’t planning to buy.

7) Review Your Credit Report Once a Year

Credit reports are crucial to lenders if they want to make a decision about whether or not you have the ability to pay back a loan. Check your credit report at least once a year, make sure it is error-free, and dispute any errors you find. If you notice errors on your credit report, it could cost you more in interest rates.

8) Pay Off Current Debt

One of the best ways to avoid future debt is by reducing your current debt load, which could mean paying extra on a credit card or looking for lower interest rates from your bank. If you have too many bills to pay each month, consider consolidating them into one low-interest loan.

9) Prioritize Your Savings

If you don’t have any savings, then you should put some money into a basic emergency fund. There will always be unexpected expenses, so it’s important to have a safety net. 

You should save 6 months’ worth of your salary if possible. By doing so, you can handle situations like loss of job, an injury that prevents you from working, and other financial hardships without adding more debt.

Final Thoughts

Most people find it hard to avoid getting into debt. Often, spending and keeping up with the Joneses is the hardest part, and it’s become a major temptation for many people in today’s society. However, by adopting a mature financial attitude, there are ways you can limit spending and avoid debt.