Debt is a four-letter word. There, I’ve said it. Unlike other four letter words, debt can be used as a valuable tool to help accomplish goals. However, if you are not very careful with debt, it can burn you. In fact, playing with debt is like playing with fire (another useful four letter word). The safest course of action to have when it comes to debt is to avoid it wherever possible, and taking of it when you do. With that in mind, here are some tips to avoid debt.
Tips to Avoid Debt
Create an Emergency Fund
One of the biggest reasons people use their credit cards is because of an emergency. Things happen in life, whether it is a card breakdown, unexpected fees for school, sudden illness, the list goes on.
By having an emergency fund, you can use it to cover those emergencies instead of going deeper into debt.
A good emergency fund will cover three to six months of your expenses. However, if something comes up, it can be used to pay it. After all, that’s why it’s called an emergency fund.
If you are having trouble creating an emergency fund, you may already be too far in debt. Consider help if you can’t rise above it on your own.
Don’t Charge More Than You Can Afford
The last thing you will want to do is to go into debt for more than you can actually afford. You do want to be able to pay it back at some soon in the very near future. H
ow much is too much? Here is a simple rule of thumb – if it is more than you could afford to pay in cash, it is too much.
Pay Off Credit Cards Each Month
If you do use credit cards on a regular basis, then this is the single best piece of advice that you can follow to avoid debt. By paying the card off each month, you are proving that you are not overspending what you can afford.
This also keeps your credit score at a maximum, since you have all of the available credit at your disposal and it’s not being used.
So, by paying off the cards each month you avoid going into debt as you help build your credit rating. That is, as they say, a win-win.
Stay Away From Cash Advances
Credit Card companies offer cash advances, and for a good reason – there are fees and often additional interest on each transaction. The fee up front is bad enough, but the additional interest can be factored into the amount you pay over several months or longer.
Even if you pay off your credit cards every month, you are still losing money on the fees. So try to avoid cash advances. If you find that cash advances are hard to avoid because of existing debt, seek help from a qualified company.
Limit Your Credit Cards
A credit card can be a temptation to use for things we want now – it thrives on instant gratification. So what’s worse than one credit card?
That’s easy, having several of these enablers at your convenience, just waiting to pull you deeper into debt. By limiting the number of credit cards you have, you should find it easier to avoid the siren’s call of debt.
When you limit your total credit cards, you also limit how much total debt you can acquire. This saves you from going too far down the rabbit hole and helps to avoid debt. Avoid having any more credit cards than necessary.
I know I’ve mentioned this before in this article, but you may find that you already have too much debt to handle on your own. IF this is the case, don’t hesitate to get help from an established company specializing in debt reduction.
It’s too easy to get into debt. But with a little effort, you can avoid any unnecessary amounts. By following these tips you can kick excessive debt to the curb, which is a great place for it. Leave it there.