5 Precautions That Will Protect You from Debt
By Alek S.
Being in debt can sometimes feel like you are carrying the weight of the world upon your shoulders. Indeed, debt sometimes feels like an actual physical sickness that you simply don’t get better from, and it actually can cause pain and health problems through stress. Once you are in debt, it can be difficult to work your way out, but it simply must be done. However, it can be a lot easier to prevent yourself from ever getting into debt in the first place, if you arrange your life and finances in a certain way. Here are some particular strategies that can protect you from getting into debt…
Plan for some “mad money”
First of all, one of the most important and most obvious financial rules to remember is that saving money pays off, in the long run. However, it would be unrealistic to assume that you will never have times where you’ll want to splurge with your hard earned cash. Presuming that you’re never going to splurge your money is like assuming you’re never going to sin. It just isn’t in the cards. However, to prevent money splurging from really hurting your finances, it is a good idea to simply plan for those splurges and set money aside to spend on treats that you and your family really want now and then!
Have a plan
If you don’t know what your money is doing, then it is always going to be getting away from you. That’s just how money works. It’s almost like a law of physics. This is why it is so important to have a plan for where your money is going to go. When you first start making a financial plan, it can be quite simple. One popular method is to put cash in envelopes with different categories, such as rent, food, entertainment, etc. However, as you get more capital and buy a house and your finances get more complicated, it’s a wise idea to get into estate planning, which gives you a long-term organizational plan and helps you save for your future. It also helps take care of your will and certain trusts.
Use cash, when possible
That envelope method of planning your money out that we mentioned above is a great idea that works for a lot of people. It’s dependent on one particular aspect, though: cash. The problem with handling all of your expenses on a plastic card is that there is far less accountability when you pay for things that way. Using cash allows you to set aside a very specific amount that you cannot physically overspend on, since there is only so much cash. Likewise, when you go shopping, take cash with you to spend. This way, you can’t go over budget if there is something you talk yourself into buying, and you already are prepared for how much more you might spend than you planned.
Save, instead of using payment plans
Like we said before: saving is the most important aspect of managing finances. You should always be putting money away for future use, every month. To help motivate this habit, avoid using payment plans to purchase anything. Usually, these plans require interest, and put your credit at risk. If you can, wait to purchase something until you have the money to purchase it outright. If you consistently do this, you’re already several steps ahead of everyone else at avoiding debt. However, there might be certain purchases that you still take loans out on, such as for a house, but these should be sparingly done.
Protect yourself from credit cards
The exact opposite of using cash is using a credit card. Credit card companies thrive on how convenient it is to simply whip out your card and make a purchase. However, most people end up paying more for things because they allow credit card interest to stack up and hit their wallets hard. You might think you’ll be an exception, but remember that credit card companies make loads of money, and it’s all coming from people like you. However, if you can use them wisely, credit cards can go a long way towards building credit. One strategy to keep your credit card purchases down is to write down every credit card purchase as soon as you make it, so that you there is something tangible that keeps you accountable.
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