These days, it’s so easy to get into debt, and so difficult to get out of it. Every mail delivery brings more offers for credit cards, with an enticing introductory 0% interest rate for balance transfers and purchases. This encourages people to spend, believing they’re getting a bargain. Then, after the introductory period, they’re faced with a large debt to service. However, it is possible to avoid debt. It just takes a little thought and forward planning.
Want versus need
Each time you’re thinking about buying something new – particularly if it’s an expensive purchase – ask yourself whether you’re buying it because you want it, or because you need it. If your cooker blows up, you obviously need to buy a new one. However, if you decide the cooker doesn’t quite match the new tiles in the kitchen, it’s a ‘want’ rather than a ‘need’ purchase. While it’s fine to treat yourself once in a while, too many ‘want’ purchases will soon rack up debt.
Go for the interest free options
Whenever you can, buy big ticket items on interest free purchase plans. This does not necessarily have to involve credit cards. Many furniture and electrical stores have their own interest free payment plans, and mail order catalogues also offer an interest free option. Okay, you may pay a little more on the purchase price for the privilege of spreading the cost, but think about it. If you snap up that bargain with your credit card and don’t pay off the balance when the statement comes in, you can rack up a lot of interest, and that ‘cheap’ television could actually cost you twice as much.
Many people avoid carrying too much cash, believing that if the cash is in their wallet, they’re more likely to spend it. However, numerous studies show that the opposite is the case. People with credit cards are more likely to overspend, and the more credit cards you have, the more likely you are to flash the plastic.
If you have to open your wallet and work out if you can afford something, the extra thinking time often overcomes the initial impulse to purchase. And handing over cash instead of paying by card also brings home the value of things. That $200 dress may not seem like such a must-have if you have to count out notes rather than pass over the plastic.
Perform plastic surgery
How many credit cards do you have? It’s probably more than you need, so choose the two with the lowest interest rates, and keep them for emergency purchases. Cut up the rest of them, and do the same when replacement cards arrive. The more credit cards you have, the more likely you are to get into debt.
Forget shopping day
Many families have a regular shopping day each week, but if you apply the ‘need not want’ principle to food and household shopping, you can save an awful lot of money. You know the score – you pop into the supermarket for bread and milk, and emerge with a laden trolley. If the shopping’s been paid for by credit card, that’s a debt that could still be there long after all the food has gone, and you’ll end up with a severe case of financial indigestion.
Every family has some debt in their lives. Most people could not afford a house or a car without taking out a mortgage or a personal loan. However, if you look out for interest free deals, limit the number of credit cards you carry and apply the ‘need not want’ principle to most of your purchases, you should be able to avoid falling into unmanageable debt.