How to Stay Out of Debt

Debt – it’s one of the scariest words an adult can hear. Yet for many of us, debt is something we face every day, especially when we have student loans or credit cards to pay off. So, if you’d like to be more financially secure in your life, what steps can you take in order to keep yourself as debt-free as possible? Particularly when debt is something that causes us so much stress.

Use Credit Cards for Benefits – Not Money!

We’re in an age where everyone wants the latest smartphones and technology as well as the best in designer clothing. However, if you can’t afford these items, don’t be tempted to put lots of charges on a credit card to worry about it later. Instead, when using credit cards, you should be using these for their benefits not the money. As you’ll often find that many credit providers will offer cash back offers, gift vouchers and air miles for those that use their cards. So, make your purchases on that credit card but be sure to pay that balance off the same month.

Limit Household Expenses

We often think of our household expenses as things we need to live. However, many of our so-called household expenses are actually luxuries that can sap away at our monthly pay checks, such as high-speed internet, cell bills and cable TV. As a rule of thumb, your household expenses shouldn’t take more than half your monthly pay. Otherwise, your bills will soon become a burden on your finances and could put you in serious debt if you lose your job.

You should also look to prioritize some expenses – such as healthcare or retirement fund – as if you don’t pay for these now, you could find yourself in debt later.

Have an Emergency Fund

If you want to stay out of debt, it’s essential that you have an emergency fund of at least $500 in a separate account. That way, when your car breaks down or you need a new household appliance, you won’t put yourself under financial strain. Ideally, you should aim to save the equivalent of 4-6 months of your regular pay, which means if the worst happens and you lose your job, you’ll have adequate money to see you through until you find a new job.

Avoid Unnecessary Fees

Whether it’s for an overdraft, credit card interest or late fees, you should always try your best to avoid unnecessary fees. As, over time, this money adds up and could have been used to pay off some of your debts. Instead, always check the terms and conditions of any credit agreement you have and try to make any payments on time.

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Being debt-free can feel like an impossible mountain to climb, but with clever management of your finances, it’s entirely possible. Then, when you do get rid of your debt, make sure to continue these practices as this will help you from ever getting into debt again.