Debt may seem unavoidable especially in a world where it seems the only way to make major purchases in life is through credit. We have rent, mortgages, credit cards and then we have expenses associated with living that include our clothing and all those school supplies for the kids. So how do we avoid debt when it seems that everything we need is going to require us to go into debt of some kind?
Debt is a fact of life for a lot of people but it doesn’t have to be. There are those that live above their means, those that live within their means and those that live below their means. Those living below their means are the ones that end up far better off in the event of an emergency and have the least amount of debt to their names. Their lives are often less stressfull because they’re sure they won’t get those annoying collection calls in the future.
We begin avoiding debt early by learning how to create a budget and save money. To avoid going into debt we must learn to live not just within our means but below them. Just because you can afford to the payments doesn’t mean you can afford to purchase the item in question. There are those that do their budget each month and find that they are including a large amount of small payments that have nothing to do with keeping a roof over their head or food on the table. When we cut out these tiny expenses we can find more wiggle room in the budget and avoid debts we can live better without.
Instead people are finding that their car payment and credit card bills are taking up a large amount of their monthly income. While credit cards are nice to have in the event of an emergency we often forget that we got them for emergency situations and use them for items that we don’t need such as a completely new wardrobe when nothing is wrong with the clothes we have. Impulse purchases cause us to dip into our bill paying money causing bills to be late and acquire interest charges and late fees that send us further into the cycle of debt.
We must learn to distinguish between necessity and luxury when we make our budget. While we may enjoy our cable television and Internet connection paying for them may contributing to our debt. While the payment of one bill may not seem like a lot of money at the time over a year it can add up. If we are paying for these luxuries and we cannot manage to put so much as a dollar each month into some form of saving we are actually living beyond our means.
Credit card are incredible tools that can come in handy in an emergency but the monthly bills when paying only the minimum never seem to stop because of the added interest we continually acquire. Not having credit cards all will prevent the trap of credit card debt. If you must have a credit card because you have no savings that only using the card in emergency and paying more than the minimum payment each month will help to pay off the card faster; in some cases where you must make purchases on credit the monthly bill will be reduced by your creditor after you have been paying over the minimum payment for a certain amount of time.
Making a realistic budget will go a long way toward avoiding debt. When you make a budget to include the cost of healthcare, shelter, transportation, food, emergencies and the cost of taking care of your family you will have what is considered to be a rather realistic budget that leads no room for error. Rounding up when making the budget will ensure you have a better chance of covering even the most unexpected expenses because you will have money left over at the end of that month. When expenses are rounded up we have money to save without realizing it, we simply take the entire amount as spent.
When making the budget a specific amount should be designated to save each month. Resisting the urge to run pull many of the savings will help to avoid debt should something go wrong. Giving yourself an allowance will force you to stop spending when the money is gone especially if you do not have credit cards to fall back on. Falling back on credit cards is too easy and leaves us thinking that we can have an endless supply of money for days when money would be too tight to do anything but scrap by.
Avoiding debt among expenses making you go beyond your budget doesn’t mean doing without, those on a limited budget that require services should check with local resources to find out if there is any way that these programs may just be able to help in locating services that you need at a reduced cost to prevent large bills. Remember the best way to avoid going into debt is to determine what to can live without versus what you must absolutely have to live and avoid high interest rate and credit card charges.