Debt is just simply horrible. It on your mind all the time and one of the biggest contributors to stress. Save yourself and the people around you from the grief and heartache that debt brings. With these 5 tips, you can hopefully stay out of debt.
Tip #1: Focus on Needs, Not Wants
The next time you get the urge to buy something, stop for a minute. Exactly what are you going to use the item for? Score it from one to ten, with one being something you could live without and ten being essential. Don’t buy it if it scores low. Think about all the stuff in your closet or garage at home that you don’t use and is just sitting there. If you have an urge to buy another fabulous blouse, count the ones you already have. Does having another one really make sense. A good mantra to follow is never buy something the minute the urge hits you. Come back after 24 hours so that you have time to consider the merits of that purchase. Instead of getting a new paperback, why not take advantage of a nearby public library, or look for free copies online?
Tip #2: Keep a Money Diary
We tend to forget small expenses if we don’t write them down. The $15 you spend on snacks every day add up to around $5000 a year! If you abstained from snacking, you could save up for a new laptop or something you truly need to have. By making a daily money diary, you can see exactly where your money is going. You can identify frivolous spending. Forget brand names and commercials; learn how to identify quality goods by comparing them with each other. That way you can pinpoint real bargains and save tons of money without scrimping on value.
Tip #3: Create and Stick to a Budget
Create a budget by calculating from your monthly income. Determine your maximum allowable expenditures for each category and follow it religiously. Budgets encourage imaginative spending and give you insight on how to save more. Online money manager software is a great tool for doing this.You can keep food costs down by brown-bagging instead of buying lunch. If something is too expensive, then you are obligated to hold off until you can afford it. Most people tend to miscalculate their spending power. You should never spend more than you earn. Base calculations on actual money and discount credit.
Tip #4: Be a Responsible Credit Card User
Credit can be a curse if abused, but used wisely, it can be a true blessing. Never let yourself be tempted to break your budget with credit. Minimize credit card debt by paying at least the minimum amount, more if you can possibly afford it. If you have incurred significant credit card debt, then you need to completely abstain and stick to paying with cash until you pay them off. Consolidate your debt by moving to credit companies with lower interest rates. Once you get back on your feet, limit yourself to two credit cards at most.
Tip #5: Save, Save, Save
You need to set aside funds both for planned and unplanned expenditures. An example of foreseeable expenses is the inevitable holiday season. A contingency fund amounting to three to six times your monthly salary should always be ready in case you get fired or need medical treatment. Watch out for fraudulent credit offers which seem too good to be true.
Avoiding debt is not an impossible dream, but you need to take responsibility for your actions. Never spend more than you earn, and remember to set some aside for savings and unexpected expenditures. Financial contracts and terminology may seem difficult, but it is essential to understand them if you are to avoid costly mistakes. Learn how to manage your finances, and you will never have to worry about breaking down in the middle of your life’s journey.