Tips How to Avoid Debt

You wait in line at the grocery store or other retail outlet, including a gas station, and when it’s your turn to pay, out comes the credit card. Actually if you stop to think about it, when is the last time you ever saw any person reach in their pockets and pay with “cash?” You remember cash, don’t you?

It’s those green pieces of paper with the pictures of dead presidents on the front. And if you live anywhere close to a college campus that has a grocery store nearby, all you need to do is stand in line with the college-age kids, and watch when they pull out a credit card from the “Bank of mom and dad,” to buy gum or candy bar or 6-pack of soda, and get $20 bucks cash back to pay for gas later on. And now you know why most everyone has a debt problem in this country. Sometimes you’re the cake; sometimes you’re the frosting.

You won’t have to look far or long online to find suggestions and tips on how to avoid debt, or at the least, a do-able map or primer on how to keep debt at a minimum. They’re like moss on a Mississippi tree stump; everywhere! Some are enticing, some are free, and some cost money. However, in this financial blog perhaps you will find that it’s possible to get on the “avoiding debt train to solvency.” And with a dash of diligence, a spoonful of patience, and a wheelbarrow full of equanimity you can succeed.

  • Tip #1 – If you currently have a bank used for savings and/or checking contact them immediately and ask for a debit card even though you may already have a credit card with their name on it. If you don’t have a checking account, get one pronto. Once received, take all your credit cards that are still in effect, get a freeze-proof container, and put them in the freezer hidden behind the meat. From that day forward only use the debit card which is essentially cash, since the money you spend comes out of your checking account. This takes discipline, but it works.
  • Tip #2 – Pay off as much debt as you can and don’t just move it around to another source. Start with the “nickel and dime” stuff you owe that has a balance less than $1,000. Save your payment receipts, too.
  • Tip #3 – Stop opening new accounts you don’t need. Adding accounts is a “killer” on your credit and FICO scores.
  • Tip #4 – Only buy what you need. Especially when it comes to groceries and clothes. Nobody needs 10 pair of shoes. Food prices have skyrocketed so you don’t need to buy groceries every other day. Have a yard sale on stuff you don’t need, and apply the money to your debt.
  • Tip #5 – Give yourself a $100 weekly allowance and become inventive how it’s spent. Finally, take stress out of your life.

How to Avoid Getting Into the Debt Trap – 5 Lessons

Credit and debt are a way of life for some people until they become trapped and unable to manage their bills. It is widely encouraged that a person should obtain a few credit cards to begin building their credit record and history. A good credit history is useful when financing a major purchase, such as a vehicle or home. Unfortunately, paying down accumulated debt can easily become a problem. Learning how to avoid getting into the debt trap and ruining that credit record is a skill to master. There are many methods suggested; actually managing debt is not always easy.

Debt Lesson #1

Avoid spending more than your income. Emergency expenses always seem to crop up just when the monthly income has been all spent. A simple answer is turning to credit cards. The better answer is to plan ahead and save up a small fund just for emergencies.

Debt Lesson #2

Just when you reach your credit limit, lenders have a sneaky way of trapping you by suddenly raising your credit limit another couple hundred dollars. Before long, you may reach that limit, but as long as you continue to make minimum payments, they are likely to again raise your limit.

Debt Lesson #3

If you only make minimum monthly payments, it could take many years to repay your debt. With high interest rates, you might end up paying many times the original bills.

Debt Lesson #4

Avoiding the debt trap is not easy. It requires careful money management, planning and discipline.

There are many strategies for repayment of debt. One popular one entails paying off the smallest debt in full first and then putting whatever payment that was used for that debt onto the payment for the next larger debt, until all are paid off. Another strategy calls for first paying off the bill with the largest interest rate.

Some debtors get a consolidation loan to pay off all debts and to start fresh with one larger debt that might have a lower interest rate. These larger loans may have an overall lower payment, but you still will be paying more money over a longer period of time. This is not the best solution either.

Conclusion

  • Use a budget and stick to it. Plan out a month or two in advance to include all income and payments due; apply any extra amounts to one of your debts. Perhaps you need to find another income source and use that money just for quickly reducing your outstanding debts.
  • Do not take on any new debts. Open no more credit accounts and definitely no payday loans at sky-high interest rates. Do not make any new charges on existing accounts.
  • Operate on a cash basis for all current expenses. Use your budget and an envelope system to parcel out your income for each expected expense area. When you use plastic, it just is not the same as handing over your hard-earned cash supply. Use coupons for groceries, shop the sales and cut corners whenever possible. Little things help reduce your overall debt load.
  • Once all debt is repaid, you can start using credit again, but carefully. Only charge what you can repay in full and never use credit for everyday expenses, like food. Being debt free is possible if you stay out of the traps along the way.

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