How to avoid debt

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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