No one really wants to experience all hassles and complexities involved with debt. Staying out of debt is a good habit. However, it is easier said than done. If you fall into a debt trap, you need to find ways to get out of it. Everybody has to realize the fact that prevention is always better than cure. If you can stay out of debt, you don’t need to spend time for discovering methods that solve debt related issues. Here are 10 solid financial tips for staying out of debt:
1) Mindful about spending with self-imposed credit limit monitoring
Many people don’t control their spending and often worry about debts. If you cannot control your spending based on the income, you don’t have any right to talk about debt related issues. The credit utilization ratio is a very critical aspect in calculating your credit score. In other words, your existing credit line in comparison with credit amount available is very important factor in determining your credit score. This awareness needs to be there in your mind when it comes to spending money. It cannot be said that any particular ratio results in dropping the credit score of an individual in a drastic way. However, it is always a good practice to maintain your credit use low in a relative manner. In addition to offering a positive influence on your credit score, this method of approach compels you to stay informed about your credit card balance. You can also be increasingly aware of your spending. It allows you to stay out of debt in a practical way.
2) Make use of a good budgeting app to stay debt free
There are numerous tasks to be done when it comes to dealing with matters where money is involved. You can come across various types of apps in the market which assist you in establishing a monthly budget depending on how much money you are earning and how much you are spending. You need to discover a highly functional and dynamic one that offers optimal benefits. Best applications help you keep track of expenses and investments in an efficient way. Moreover they offer solutions like future budget planning, bill payment and finance management. If you use the best products available on the market, you can enjoy some exceptional benefits. Most prominent advantages are guaranteed financial transparency, user friendly interface, fast and convenient access to relevant information, accurate invoices, tactical planning and more. Advanced apps are equipped with more sophisticated features and you can keep track of your financial activities in a precise way. When you consider all these aspects, using budgeting apps can always be described as an effective way to stay out of debt.
3) Never allow the budget to increase
Many people believe that if they increase their income, staying out of debt becomes a simple task. This is not a right perception. The challenge of staying protected against debt is not linked with your income as much as your capability to resist from spending more as you enhance your earning power. This is a very relevant matter that many people tend to undermine. When they start earning more, they start spending more as well. Are you one among them? You should never permit the budget to go up even when you get a salary hike, tax refund or a bonus. This approach needs to be applied even when your cost of living increases. Whenever you get some extra income, you should put it into an account directly that pays interest. This approach helps you grow the cash value in an efficient way and stay out of debt sustainably by controlling the expenses. You can also learn how to plan and work toward your financial objectives by staying debt-free for a lifetime.
4) Focus on managing credit card balances depending on cash available on hand
Why do many people use credit cards? The simple reason is that they can buy whatever they want using credits and payment needs to be done later only. This is a convenient method to buy some inevitable items if you don’t have cash on hand. When you misuse this freedom, you are finding a way to make you susceptible to debt. Smart shoppers don’t follow this practice. These people always ensure that they have cash on hand which can be utilized to buy something. They put in plastic or make use of credit facility only when there is an inevitable need. The advantageous thing about this s strategy is that it allows you all rewards and benefits offered by credit card companies. At the same time, you don’t have to deal with a credit card balance you can’t make payment in full. This method inculcates a sense of discipline in the minds of the consumers and they learn how to spend according to the cash on hand.
5) Control housing expenses in the best way you can
Falling into a debt trap is very easy. It is really difficult to get out of it. Staying out of debt also requires a lot of discipline, planning and proper execution. Some people always come under the category of severely cost burdened. What makes them qualify for this? The most prominent reason that makes a lot of salaried people vulnerable to debt is the increasing amount allocated for housing expenses. Several studies reiterate this fact without a shadow of doubt. In fact; the monthly housing expenses of these people account for at least 50% of their take home monthly salary. If you are spending more than 50% of your salary for housing expenses, you should control your expenses in a strict way to stop preventing from getting labeled as severely cost burdened. When living expenses account for at least fifty percent of your paycheck, you often get compelled to make financial compromises in areas such as retirement savings and health care. This situation drags you into debt over period of time. It is something you should be really mindful about to stay out of debt.
6) Say no to unwanted instant online orders
Many impulsive buyers immediately make a purchase decision when they find a new offer. These people don’t even think whether they actually need it. You can come across numerous attractive offers online nowadays. Some of them are irresistible for several people. You just need to click once to twice to order any product. It can be a book, shoe, belt, glass, food item, appliance and many more. The online advertisers create a captivating impression on customers and make people feel that these products are absolutely essential for them. Everything has become really easy. That is the real issue. When you find that you just need a click to get a product/service at your doorstep, you often go for it without thinking about the budget. As you keep on making these types of buying decisions, you are hurting your budget in a serious way. Over a period of time, you will fall into a debt trap without even knowing where the actual reason lies. You must learn the art of saying no to unwanted instant online purchases. It is always advisable to curb your instinct for mindless online shopping. You have to be budget conscious and purchase only what you really need. This attitude and approach always assist you in staying out debt.
7) Hire an experience financial planning consultant
Several people seek professional help to stay out of debt. It is always advisable to hire a professional financial planning consultant to get the right advice and support to stay out of debt. When you hire financial company for money management advice, you have to choose one with a good track record and reputation. Wrong advice and guidance can make your life miserable. Experienced and reliable financial management experts come up with the best solutions that help you keep track of your finances in a vigilant way. They make you familiarize with innovative tools and methodologies that guarantee outstanding results. You can expect customized solutions when you hire reliable financial experts. They design a perfect plan that meets your unique needs in the most efficient way. Top companies build long lasting relationship with their clients and keep on delivering quality advice and guidance to help them stay of debt for life. You have to conduct proper research to identify a renowned and trusted financial planning consultant with an impeccable track record. Best companies inculcate all good habits in you to become debt-free individual.
8) Never make any compromise on keeping an emergency savings fund
If you don’t have an emergency savings fund, you won’t be able to meet an immediate need on your own. Without these types of funds, you are compelled to borrow from others during emergency. It puts you in a situation where you don’t care about the interest and other added expenses. When your budget is derailed, repayment becomes a difficult process. You may often borrow more money to invite serious trouble. This situation puts you in a complex debt trap. In order to avoid all these complications, you have to maintain an emergency savings fund which can be utilized when emergency needs pop up. On an average level, every individual has to create an emergency savings fund that could cover around 4 to 6 months of basic expenses. The exact figure needs to be determined on the basis of your job security and yearly income. You can stay out of debt if you focus on making automatic contributions to a savings account from every paycheck you receive. It needs to be done even when you are finding it hard to save a little bit of money in a particular month.
9) Stay committed to avoiding unwanted fees and penalties
Various studies clearly reveal that a large number of people have been paying a lot of money in the form of credit card late fees and penalties every year. You might be certainly one of them. All these late fees damage your budget in a serious way and you fall into a debt trap within a few years. If you stay committed to avoiding these unnecessary fees, you can save a lot of money which can be transferred to your emergency savings fund. Many people commit the mistake of not reading the agreements and terms and conditions of credit card companies. This habit help them keep you in darkness and you would end up paying all types of late fees and hidden charges demanded by them. One good example is that several credit card service providers come up with a grace period on new purchases and all finance charges can be avoided if you make full balance payment for a given statement within the due date. Grace period may not be applied to credit card balances linked with cash advances and balance transfers. You may also have to deal with extra transaction fees. If you are not having proper idea about the potential fees related to various transactions, you need to talk to the credit card company or bank to clarify all your doubts and concerns.
10) Make use of all offers and rewards when you make purchases
It is a fact that credit card rewards sometimes encourage overspending which in turn make them an confusing choice for an individual who wants to avoid debt. However, rewards and incentives offers by credit card companies can assist you in saving money. You can make use of cash back offers, redeemable points and many more to make your purchase more profitable. When you have a credit card, you should conduct ample research to find all offers and schemes provided by your credit card service provider. It does not mean that you have to keep on buying all unnecessary things. Whenever you make a purchase, you have to utilize all offers available to save money in all possible ways. Some of the rewards may expire after some period of time if you don’t utilize them. You need to keep track of all rewards and exploit them fully to save whatever possible.
Staying out of debt is not easy task. You have to show high flexibility, discipline and commitment to keep your financial condition healthy and debt free. When you stay out of debt following these methods over a period of time, it becomes a habit which in turn delivers excellent benefits in life. Good habits, once cultivated, don’t easily go away. You can stay relaxed and lead a debt free life if you learn about the best method for staying out of doubt and follow them in a systematic and disciplined manner.