Large debt can hurt credit, cause myriad health issues and become an overall wrench in a debtor’s life by distracting them from their personal goals and affecting most decisions they make.
Unfortunately, most people don’t realize the toll credit card debt can take until they’re living it. Debt is seen as a problem other people have. Except, if that’s the case, U.S. consumer debt wouldn’t be approaching $4 trillion, and average household debt wouldn’t be hovering around $16,000.
Let’s look at how to escape the dangers of debt so you can enjoy a financially responsible, relatively stress-free lifestyle.
Don’t Live Beyond Your Means
The central hallmark mantra of frugal living deserves to top this list, because if there’s any one thing to take away from this article, it’s to not live beyond your means. Doing so will automatically avoid many of the tips below.
Charge Needs, Not Wants
There’s a pervasive idea that credit cards are bad. This not only is incorrect but can lead to a lot of missed financial opportunities such as money saved through rewards and a robust credit score. Credit usually becomes an issue when people charge things they want instead of things they need. We have to have money for gas and groceries, we don’t for a supplemental pair of shoes or a new stereo. Thus it’s far likelier that you’ll pay off charges for things you were already planning to spend your money on.
Pay Off Your Card Every Month
There’s no better way to waste money than by paying late fees or interest on your debt balance. You can’t get into debt if you pay your credit card(s) off each month. If you’re practicing the above behavior, you should have no issue paying your statement in full.
Recognize Credit Problems Before They Occur
Many people become stressed when looking at their finances head on. It’s much easier to live with a general idea of where you stand. That’s all well and good if you have loads of disposable income, but otherwise, it’s a great way to get into debt. Without keeping close track of where you stand on your credit cards and when various bills are due, you could suddenly find yourself in a predicament.
Create a Budget That Makes Sense for You
I know, I know, budgets are icky, no fun, too pragmatic, and so forth. However, smart budgets relieve stress and contribute to good financial hygiene. You might think you can keep track of your spending on feel, but without tracking spending categories and the amount you can allocate to each, it’s very easy to spend more than your income warrants, particularly with things like eating out and entertainment.
Follow Industry Advice
It’s always helpful to keep tabs on what the leading financial gurus and companies out there are advising on financial best practices. Top financial minds include Dave Ramsey and Chris Hogan, among a laundry list of others. Also pay attention to companies that help get people out of debt; even though debt is their business, they’re financially savvy and often post helpful tips on social media. For example, one debt relief company, Freedom Debt Relief is pretty active in sharing industry news articles and their own tips on frugality and smart financial living.
Build an Emergency Fund
Only 39 percent of Americans have enough in their savings to cover a $1,000 expense. With no cushion to cover an unexpected medical visit or an unforeseen car repair, what seems like just enough cushion turns into debt. An emergency fund not only saves you from possibly going into debt, but gives you peace of mind knowing you have financial security.
Set Savings Goals
It’s so easy getting caught up in the day-to-day grind that we never commit to a better financial future. After building an emergency fund, bake short-term savings goals into your budget. Pair the short-term goals with an overall long-term strategy. The long-term strategy might seem daunting to accomplish, but if you can make consistent, solid strides, you’ll get there.
Reward Your Good Behavior
It can’t all be discipline and frugality. Keep a short wish list, whether it’s a weekend trip to a new city or adding accessory equipment to a hobby of yours. When you hit one of your savings goals or have stayed within your budget for a certain amount of time, treat yourself! Rewarding ourselves completes the goal cycle and motivates us to start working toward the next one.
Debt is nothing to teeter on the brink of; it can destroy lives and relationships. Once you’re deep in it, there isn’t a quick solution. Keep the above tips in mind, especially number one, and you stand to live a financially responsible life free of the horrible effects debt carries.