Tips for Avoiding Debt

The emphasis these days seems to be on spending more, while earning less. It can be so easy to end up in debt before you know what hit you. There are some things you can do to avoid falling into the debt downward spiral.

*Budget. It is easy to create a budget that looks good on paper. It is another matter entirely, when it comes to sticking to the budget.

The first step in creating a budget is to monitor your spending for at least a couple of months. Keep all of your receipts and bank statements. Figure out how much you spend in a typical month, including entertainment and special items.

Break your bills and expenditures down into categories like rent, utilities, insurance and so forth. It is a wise practice to figure a little high for things like utilities since they can vary in cost. For example: For the last two months your utility bills have not exceeded $250, so set that amount in your budget for utilities. Your rent is probably the same amount each month, so set that amount in your budget.

The idea of a budget is have a set amount of money allotted for each category, and not to go over that amount. The key is to be honest and realistic when creating a budget. When trying to avoid going into debt it helps to see in black and white in order to discover where you spend your money.  

*Live within your means. It is difficult at times to walk away from a product or service you want due to lack of cash. This is how retailers get you with their “low monthly payments” offer. It is so easy to over extend yourself by taking on too many different payments at the same time. If you cannot buy something outright, then save your money until you can buy it. Instead of making those high interest payments, save your money in a sock drawer until you have enough to pay for the item/service in full. 

Another way to live within your means is to not purchase higher end items that you cannot actually afford. When you find yourself short on the rent money because you had to have those designer shoes, it is time to do something different ladies. Gentlemen, do you really need to spend a hundred bucks on a hair cut? You can find a good barber for less than half of of that! The point is when you start robbing one bill to pay another due to bad spending habits, you will find yourself in debt quickly.

*Credit cards. This one is either a saving grace, or will add to your debt troubles. Use your credit cards wisely. Only spend what you know you pay back in full each month. This way you build or maintain good credit rating, plus accrue rewards points/discounts from your card. When applying for a card, choose one that fits your needs: if you travel a lot, choose one with travel points, etc. Always, always, pay your bill in full each month to avoid those lofty fees and finance charges. 

*Decrease spending. Once you get into the practice of following your budget each month, take a close look at your expenditures. See if there is any way to trim off some fat, so to speak. Maybe instead of going out to your favorite restaurant three times a week, cut it back to twice a month. Not only will you save money, it will make dining out more special. This is not suggesting that you cannot treat yourself to something nice every now and then, merely that you can save money by not doing it all the time.

*Save. In this case, the saving tip is regarding things like recycling, coupon clipping and even your piggy bank.

Recycling is good for the planet as well as your home. Sort out plastics, glass, paper, etc. and haul them to the nearest recycling center. This is a very good idea. Another way to recycle is to re-use certain items yourself, at home. For example: take that glass spaghetti sauce jar, wash it out with hot soapy water and use it for food storage. This little idea will save you from having to purchase storage containers at the store. Another example: Plastic and glass bottles/jars make great decoration and craft supplies.

Clip coupons! It is actually worth the extra time in most cases. The one thing to be careful of, is clipping coupons that you will not really use. Just because an item is on sale or you found a coupon for, does not mean you have to have it. Only clip what you really do use on a regular basis. There are even coupons and discount offers for places you go on vacation, all you have to do is get online and search for them!

Piggy bank. Yes, really, get a piggy bank (a plastic milk jug, washed out, works well too). Put all of your loose change in it and do not touch it until it is full. Take the full bank to a coin machine or your bank, and reap the rewards! Consider this little bank extra gas money, rainy day money or even “mad money” that you use for a treat for all your hard work. Saving change until the bank is full actually takes some real discipline on your part. Once you get used to saving your change, it becomes such a habit that you may need a second container!  

*Pay bills on time. By paying your bills on or before the due date, you will save money on late fees or reconnect fees. Paying on time will also give you a good rapport with the businesses and could even end up landing you discounts on some services like auto insurance.

Temptation is not always easy to walk away from, which is why people must be willing to budget. Once a person gets into debt, it can seem impossible to climb back out. Even the smallest changes in spending habits end up saving you money in the long run.