How to avoid debts in life?
How to live a debt free life
Hey guys, welcome to our new instant solution short articles where we give the solution to your problems through a short to the point articles. Today we are going to talk about “How to avoid debts in life”.
Let’s get started.
Here are Top 10 ways, you can avoid debt traps:
- If you can’t afford it without a credit card, don’t buy it-
One of the most dangerous approaches to having a credit card is living under the illusion that you can afford things you actually do not have the money to afford. One good rule to live by is if you can’t pay for something in cash, then you can’t afford it with a credit card.
2. Have a fallback emergency fund-
Emergency savings are very important for those “just-in-case” situations. Best practice when trying to establish an emergency savings is to have at least 6-month of your salary saved up.
3. Pay off your credit card balances in full-
The best way to keep your spending under control is to pay your credit card balance as you go. So, if bought something that you can easily pay with cash but used your credit card to pay it just to earn points or get discounts, then without any delay pay the credit card balance the next day in full before life gets in the way.
4. Cut-out the wants, focus on the needs-
There’s always room in your personal budget to cut out unnecessary spending habits. The more you shave away the wants and spend only on the needs the better your finances will be.
Follow the 50–30–20 rule or the 50–20–20–10 and customize it the way you want fitting your budget. Both of them are for different types of people. Choose it yourself wisely.
5. Everything is better with a budget-
By budgeting out your monthly expenses you can better track where your money is going and where you can afford to spend it. Every month, parcel out how much to put in savings, your retirement fund, and how much extra you have left to spend on the necessities. So if the time ever comes where you need to do a major cut down of your expenses you will know exactly what to cut.
6. Do not use your credit card for cash advances-
If you need to use your credit card in order to have cash on hand, that is a sign that you are abusing your finances. Not only is the APR higher than regular purchases, but you’ll likely also be charged a fee. So, always try to avoid doing this.
7. Limit the number of cards you have-
Multiple credit cards mean multiple payments and multiple cases of tacked on interest. This is a setup for the eventual need of debt consolidation if you cannot handle using the cards responsibly. The more charges accumulated on each card means more room to lose track of your spending and payments. So, if you want to have a credit card, even only to build a credit score, have the least amount of cards possible.
8. Master sheet of expenses-
Be sure to keep track of your expenses in a sheet that you are able to update on a month-to-month basis. That way if you have multiple accounts and cards you can ensure that you make full payments on all of them at the appropriate time.
9. In case of pay increases-
If the occasion arises where you receive a pay increase, live off the lower wage that you had before and store the extra funds in savings. After all, you’ve managed to make it so far off your previous wage, put the new funds in a place where they will work harder for you.
10. Collect coupons to save cash-
Groceries fall under a category of “must-have” when it comes to your budget. By using coupons to minimize the cash you have to use on those needs it will free up extra money that was inaccessible before. Stashing away the extra money will build you a bigger cushion against debt.
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The above information is for educational purpose only. It is not a recommendation.