Almost everyone lives
with one debt or another in today’s world. The question of whether one can
actually avoid debt has been raised among different individuals in different
countries. It’s indeed possible to avoid debt however you will need to strictly
abide by some principles to have and maintain a debt free life in today’s
borrowing world. Countries are also in debt as some third world countries are
financing their operations and capital expenditures throwing borrowing just the
same way the citizens or those living within the contain become tied to debt so
as to fund their basic needs and wants. Debts according to some individual
financial experts should only be accommodated for need purposes and not wants
because the interest attached to borrowing might make someone a payer till
retirement if careful financial decisions is not made concerning the borrowing
of money.
Debts are always taking
charge of one’s financial resources little by little while the ability to
effectively manage it will help to determine one’s debt obligations to an
individual lenders or financial institutions. The unending accumulation of debt
to one’s financial profile will only make life difficult and less enjoyable. It
often serves as a restraining and compounding factor which affect the ability
of an individual to achieve the desired level of success in life and financial
goals. The act of avoiding debt will help in creating financial opportunities
for an individual and open an avenue for building the kind of lifestyle they
want. It’s not financially advisable to spend more than one earns to keep a low
debt free as spending more than one’s income is a leading cause of debt in
someone’s life.
Student loans, credit
cards, mortgages and car loans are some major forms of debt. Despite being a
major form, it’s a financial threat to one’s financial security. You will need
to make careful financial decision to avoid debt. Overspending is a way of
building debt profile. Handling expenses and financial expenditure poorly will
lead to financial stress therefore avoiding such financial situations is the
best way of avoiding debt. While some people can avoid debt through some stages
in life, majority can’t live without debt in today’s world. There are a lot of proven
strategies and step on how to avoid debt in an individual’s life.
1. Budgeting
Budgeting will help you
in keeping track of your expenses and also help you stick with a certain
financial resource. Having a master sheet for your financial expenses will save
you from financial stress and debt. Budgeting will help you ensure equal
appropriation of your financial resources. The 50/30/20 rule states that 50% of
your income should be allocated to essential expenses and needs such as
shelter, food, utilities, transportation, health care and other little debts
payment. 30% should be allocated to fun trips and holiday while 20% for
savings. Estimating and dividing your monthly bills and expenses will give a good
and reliable view of your financial expenses.
2. Have a reserve or
emergency fund
We live in a world where
different emergencies may happen at unexpected time. Having some money for
precautionary motive will help you cover unexpected events that may happen such
as accidents, sickness, job loss, injury and other emergency cases. It’s
recommended by financial experts that some month salaries should be saved up to
serve as emergency fund. While six-month salaries seem unrealistic, keeping
away three-month salary is more realistic and achievable to serve as emergency
fund. When you establish a saving account for emergency fund, you can easily
overcome your emergency cases if not at all at once at least to some extent. It
will also serve as a form of saving if an emergency doesn’t happen.
3. Get a job
You can’t live a debt
free life without a job or a form of employment. Having a job with provide you
with an income to offset your financial expenses. Having a well-paying job and
adhere to work principles and policy such as getting to job early, improving
positive relationship among colleagues and working beyond expectations. You
should strive to perform more better at your job to increase your position and
salary as well. Remember that having a high income doesn’t mean you have more
to spend on unnecessary expenses and bill but you should have more to save.
4. Invest
Financial resources
aren’t meant to be saved only. An individual with a good financial goal will
see the need to invest to generate multiple streams of income and keep up with
necessary expenses. When investing, you should be more careful with your
financial plans to avoid falling into debt traps. Also, you should avoid early
expectations and profits from your investment as it takes time to grow but will
profit you in the long run as long as they are properly analyzed.
5. Pay your bills early
and make the right use of credit cards
Learn to avoid late bills
to avoid debt as accumulation of late bills will affect the financial saving habits of
an individual. When you pay your bill early, it will save you from unnecessary
expenses and help you keep a solid payment history which will directly increase
your credit score. Also, you should make use of credit card only when you have
the cash to make purchase as the credit card are only to expected to provide
you with additional financial benefits.
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