No one likes being in debt, but there are some situations where you just have to borrow money to cater to particular needs. It is something that sometimes happens without noticing and it is good to know that staying out of debt is possible. There are specific strategies you can use to control your finances and ensure you avoid bad debt. So, if you are looking for effective strategies, consider the following:
Have an Emergency Fund
Having emergency savings is critical to cover emergencies. The best way to start is by saving at least six months of salary. With an emergency fund, you will have money to cover unexpected expenses if you are injured, your car breaks down, or you lose your job. Use the Prillionires net worth calculator to know how much income you are getting. Once you calculate it against your spending, you will learn how much you will save on your emergency fund.
Don’t Buy IF You Can’t Afford
If you have a credit card, avoid living with the illusion that you can buy anything even when you don’t have enough money. It is always advisable to live within your means and purchase anything you can afford. If you cannot pay something in cash, avoid using cards.
Focus on Needs and Cut Out Wants
Always focus on the things you need. You always have room in your budget to cut out all unnecessary spending. It could be grabbing a coffee every evening. Once you do away with the things you want and maintain what you need, it will be easier to stay out of debt and afford things.
Pay Off Credit Balances in Full
Another way to stay out of debt is to pay your credit balances in full. So, if you buy something using your credit card, ensure you send the payments sooner before things get on your way.
Keep a Budget
Having a financial plan cannot be understated. It is crucial to set a budget to track down your income and monthly expenses. That way, it will be easy to know where your money is going and limit spending on unnecessary things.
Don’t Keep Many Cards
Multiple cards mean many payments and more interest. Once you use many cards to purchase things, you set yourself up for debt consolidation once the debt starts burdening you. The more charges you accumulate, the more you get out of control of tracking your spending and payments.
Track Your Expenses
Be sure to track your expenses every month. You can use the Prillionaires app to update your expenses every month. That way, even when you have multiple cards, it will be easier to make total payments. The app will give you a bigger picture of your finances, credit cards, loans, accounts, and investments.
It is also a good idea to collect coupons to minimize the use of cash. That way, you can buy things using the coupons to free up money you could have used. Keep the money you save to cushion yourself against debt.
The Bottom Line
Avoiding getting into debt is possible if you can limit yourself to what you need only. Spending is a common temptation, especially when you have money. Although it is necessary, it is vital to keep track, have a budget, and limit yourself. Don’t buy things you cannot afford, and never spend without a budget.