Most of the debt that people have today could have been avoided if they had a little bit more financial discipline. If you don’t want to end up in debt and under debt review, you should consider the following.
- Always pay cash
If you don’t have the cash for it, then maybe you should reconsider making the purchase. Making cash payments helps limit your spending to the money you actually have for spending. If you use credit cards, hire purchase payment methods or loans, you risk ending up in debt with increasing value due to interest rates.
- Stay within spending limits
This is often easier said than debt. Most debt simply arises from spending beyond your means. Staying within spending limits does not mean you should always be frugal but create a budget and stick to it as much as possible. You don’t want to end up with any negative figures at the end of the month.
- Compare prices before making big purchases
You are probably missing out on a better deal somewhere else if you are easily drawn to the first price tag you see. You should be wise about large financial investments like buying a car or a new home. Look around before you settle down on one price.
- Avoid borrowing for “staple” purchases
If you are borrowing money to pay your rent or utility bills, then you definitely have a debt problem. You should live in a house that is within your income means so you can affordably pay these expenses out of pocket without having to get financial debt.
- Avoid impulse spending
Before you buy anything, try sleeping on it and the next day, you will know if you really need it and can afford it after putting some thought into it. Impulse buying is one of the biggest fuels to speeding up the journey to crippling debt.
- Control spending
You should control spending by creating a shopping budget and carrying only the amount of money you need when going shopping. This will help you prioritize on the most important things that you need to buy and avoid impulse purchases.
- Choose lenders wisely
Sometimes borrowing may be inevitable, and you have no choice but to get financial help. Make sure you borrow from lenders with the lowest interest rates and favorable borrowing terms such as early repayment without any penalties.
- Monitor your credit card
First, you should avoid having more than one credit card at a time. The more cards you have, the more you spread out debt and it becomes quite easy to forget making some payments, which increase with accruing interests. Always keep a record of all your credit card purchases so you know how much you are spending besides the cash you use. Make sure you pay more than the minimum on your credit card bill to manage the size of debt.
- Avoid overdraft charges
You should keep tabs on your bank account balances to avoid overdraft charges, which also contribute greatly to debt.
Bio
Jennifer McCarthy is a personal financial advisor. You can learn more about managing debt and the debt review process from her website.