8 Strategies to Avoid Getting into Debt


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Being in debt is something that feels like a burden to most people. Some dread the thought of owing anyone money, however little it may be. Unfortunately, we all experience debt at some point in our lives. While there is no magic formula for being completely debt-free, this blog post will take you pretty damn close. 

Living completely debt-free is something that most people dream of. It brings about a totally different mindset—a sense of freedom, peace, and opportunity. It’s important to note, though, that not all debt is considered bad debt. Some actually add value to your life and create more opportunities for you, for example, student loans. So, instead of trying to live without any debt at all, try to find the best mix of debt and savings for your situation.

In trying to figure out what would be best for you, you first need to determine your priorities. 

Steps to avoid debt

1. Avoid credit

Paying cash instead of using credit can go a long way. The interest on loans and credit cards adds up more than you might think. Therefore, if you’re unable to afford to pay cash for something, don’t make the purchase—it’s as simple as that. 

2. Plan for major expenses

Ensure that you make accommodations for big-ticket items such as houses, cars, and expensive vacations. These major expenses are so significant that neglecting them might lead you to overspend and ultimately end up in debt. So if you intend to purchase any of these, planning is key. Buying a house, for example, usually requires that you make a downpayment. First, determine how much you will need, then set aside some money monthly to help you save up for it.

3. Create a monthly budget

Budgeting is what will enable you to make the most of your income. It helps you know exactly where your money is going and, therefore, helps you determine where changes need to be made so that you can achieve your financial goals. When you learn to live within your means, you’ll begin to save money and allocate funds appropriately. 

Creating and sticking to a budget is one of the most effective ways of avoiding debt. List your monthly expenses and allocate appropriate amounts from your earnings. A useful rule of thumb is that no more than 50% must be allocated to essential expenses, approximately 15% of pretax earnings must be saved for retirement, and 5% must be saved for unexpected expenses.

4. Track your expenses

Keeping track of your expenses helps you stick to your budget. Using an expense tracker like Expensify, Mint, or Wally can simplify the process for you. You also have the option of using spreadsheets to track your expenses. If you don’t track expenses, it’s more than likely you’ll overspend and end up in loads of debt. Knowing where your money goes enables you to determine where costs can be cut if necessary.

5. Find and use coupons

Coupons help more than some are willing to admit. Though the amounts you save on your purchases don’t seem like much, they add up very nicely in the long run. So search for sellers who offer cashback and save. Couponing is a great way to save money and eliminate debt. Be smart about it, though. Just because you have a coupon for an item you don’t need doesn’t mean that you should buy it—stick to the things you need.

6. Create additional income

Consider finding a side job to help increase your earnings. Nowadays, you’re able to use your skills to bring in some extra money—whatever your skill, chances are it can be useful to someone. The Internet has created a global village where you can find jobs that you can perform virtually. Reputable websites like Upwork and Guru connect freelancers with businesses around the world. You can also market yourself on Facebook, LinkedIn, and the like. However, beware of who you choose to go into business with. Ensure that you do a Google or Nuwber search to verify that the person is, in fact, who they say they are and that they’re worth doing business with. The Internet is full of scammers, so watch out.

You need to keep in mind, though, that increased income does not translate to more spending, otherwise, it defeats the purpose. If you were able to survive on a lower income, then continue and use the additional funds to invest or increase your savings. 

7. Find ways to save

Saving money is the most effective way of avoiding debt. That financial freedom people feel when they’re totally out of debt becomes all the more possible for you with savings. All the other steps mentioned above lead to savings. It becomes easy to save when you budget, use coupons, find a gig, avoid credit, and track your expenses. Focusing on what you need rather than what you want is key. It helps cut out all unnecessary expenses from your spending. The more you cut on spending, the better your finances will be.     

8. Create an emergency fund 

Having an emergency fund plays a major role in you avoiding debt. It’s a source of cash that is readily available in times of illness, job loss, or unplanned expenses. Your financial health stands a better chance of improvement with an emergency fund—unpredictable expenses won’t break you. Best practice is that six months’ salary is set aside to cater to your needs in the event of unplanned circumstances. So in the event that something happens that renders you unable to work, you’ll have enough money saved up to cover you for at least six months. It doesn’t necessarily have to be saved up all at once. Allocating about 5% or 10% of your monthly income will suffice.

The main takeaway

If living completely debt-free is your dream, then you need to plan your expenses carefully, track them, save wherever possible, and remain committed to the dream. But if after all your efforts it turns out that being debt-free is not possible for you, then don’t let it get you down. Just find the best mix of debt and savings for your situation.

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