Scared of Going Into Debt? Good, You Should Be! Here Are Ways to Avoid It

Getting into debt can put a severe crimp in your lifestyle and put you in financial trouble for years to come if you do not get a handle on it. The best way to avoid going into debt is through self-awareness and developing an honest strategy, and having the discipline to follow through with a plan to keep you in the black.

Americans owed billions in credit card debt, student loans, and car loans every year. Online shopping and stored credit card information makes it easier than ever to rack up hundreds of dollars of bills with the click of a button. A proactive approach and a desire to keep your finances under control will drive you to make the best decisions for your economic future.

11 Ways To Avoid Going Into Debt

If you are worried about getting into debt and destroying your credit, that is a good sign. It means you are willing to summon the self-control and discipline it takes to maintain a solid financial status. The following are examples of ways you can avoid going into debt.

1. Be Honest About What You Owe

It is impossible to know where you are going if you do not know where you are. Create a comprehensive, reasonable budget by being completely honest about what you owe and where your money is going. Prioritize your debt by highlighting loans with the highest interest rates and identifying those bills that can be deferred.

2. Pay Bills On Time

One of the primary ways people get into financial struggles is by failing to pay bills when they are due. Late fees and penalties add up quickly, and consistently paying late will lower your credit rating.

3. Establish Separate Emergency Fund

Putting even a little bit of money away in a separate high-earning savings account can set up a safety net for life’s most unexpected emergencies. Have a small percentage of your check diverted into a saving fund each pay period. You will not even notice it is missing, and you will be creating security and protection for you and your family.

4. Enroll in Employer-Sponsored 401(k) Retirement Savings Plan

If your employer is matching contributions for a 401(k) retirement savings account and you are not enrolled in the plan, it is like throwing away free money or declining a bonus. The earlier you start a tax-advantaged retirement fund, the quicker it will grow and prevent money problems when you retire.

5. Save Age-Appropriately

The general rule of getting and staying out of debt is to save early and often and stash away as much as you possibly can. If you are still young and early in your working career, time is on your side, and you can afford to let accounts site and prosper over time. The older you get, the more aggressive you will want to get in your investment portfolio.

6. Protect Your Family

While you cannot take your possessions and assets with you when you die, you will not be taking your debt with you either. That will be left behind for your loved ones to deal with and pay back. Part of “putting your affairs are in order” is taking the necessary steps to make sure you will not leave your loved ones a pile of debt when your time is up. 

7. Stay Employed, Diversify Your Income

The best way to get into debt is to lose a job and the salary, health benefits, and savings plans that come with it. Unemployment levels are skyrocketing in the age of the coronavirus pandemic, so it is more important to stay employed and look for additional ways to make money. Get creative and put in the work necessary to get another job, start a business, or sell some valuable possessions.

8. Know Your Taxes

Misunderstanding or ignoring the Internal Revenue Service can get you in a lot of financial difficulties in a short period of time. Tax codes and return documents can be confusing, complicated, and frustrating. Get help if you need it, but make sure you pay your taxes on time and remain in good standing with the IRS, or they can cause you serious grief and long-term financial problems. 

9. Pay Cash When You Can

Overspending and living beyond your means is a sure-fire way to get deep into debt and cause major economic woes for your family. Only buy what you can afford and pay cash when you can. Leave your credit cards at home and disable stored credit card information on your computer to make it harder to spend money online.

10. Identify the Signs of Credit Card Debt

Proceed cautiously with credit cards and respect the damage they can cause with abuse. Being able to identify the signs that credit card debt is becoming an issue that allows you to head it off before It develops into a bigger problem. Some signs of credit card debt to look for include:

• Frequent creditor calls

• You make only the minimum payment for monthly bills

• Credit cards are maxed out

• New lines of credit are denied

• Your bank account frequently has a $0 balance

• You have no money left over for discretionary spending

• You request advances on your paychecks at work

11. Perform Due Diligence on Major Purchases

If you are going to make a major purchase, take time to compare brands, features, and price options. Look for sales and be willing to settle for models without all the bells and whistles you want. Patience and due diligence will pay off.

Avoiding Debt Offers the Chance of Financial Success

Are you afraid that getting into debt can put a damper on your goals and life objectives? Good, you should be. Credit cards and other forms of debt can strangle your long-term financial dreams and make it hard to get a loan, a job, or a home. Following some common-sense guidelines and being focused on your economic future will help you make the right decisions to keep you out of debt.