Although lots of books and articles have been written to help people once they are deeply in debt, much less is written about ways to avoid getting into debt trouble in the first place. By the time most people realize that they have a debt problem, their credit may already be seriously damaged, and getting their financial house in order again can be a slow and painful process. We encourage consumers to avoid (as much as they can) accumulating a lot of debt, and in this article I will suggest a few ways to do just that.
1) Educate Yourself on Personal Finance
Understanding the do’s and don’ts of personal finance is a very important life skill, but unfortunately most schools do a woefully inadequate job of teaching students about how to manage their finances effectively. Therefore, I strongly recommend that you take the time to educate yourself, especially if you know that you do not have a good understanding of the principles of good money management. If you are unable or unwilling to take a formal course on personal finance, there are good books available in libraries and bookstores, and you can also can find some excellent information online.
2) Save the Money to Buy Luxuries, Don’t Borrow It
One good way to avoid getting into debt trouble is to never borrow money to buy things that you do not absolutely need. Such things are called luxuries, and getting them before you can truly afford them can put you on a path to financial disaster. Do you really need to get the latest and greatest smartphone or other electronic device costing hundreds of dollars? Many people have debt issues due to circumstances beyond their control, but debt problems brought on by frivolous and undisciplined spending is truly self-inflicted damage.
3) Shop Smart
When buying the things that you need to buy, be a smart shopper. Carefully research and compare prices on more expensive items to ensure that you are getting the best deal possible. Take advantage of coupon offers and, when feasible, stock up on non-perishable everyday items when they are on sale. Plus, whenever possible, seek to buy your items at wholesale prices.
4) Keep Track of Your Spending
Ideally, you should develop a household budget and then be sure to adhere to it. At the least, you should keep track of your spending so that you know where your money is going. Seeing how much you are spending on certain things over a period of weeks or months may alert you to the need for making some financially-prudent adjustments in your spending habits.
5) Invest Wisely
Many people become financially secure and sometimes debt-free by carefully managing their money and faithfully applying the above advice. They take the money they save and put it into safe investments like IRA accounts and watch them grow over time. In contrast, the majority of Americans suddenly find themselves owing tens of thousands of dollars on credit cards and other debts, and a significant number have to make use of payday loans inbetween checks just to make ends meet. As a direct consequence of their poor money management and undisciplined spending, they find themselves caught up in a continuing cycle of struggling to handle their debt, and it can be a very difficult cycle to break.
In conclusion, I urge you to not make the same mistake that far too many people in this country make. Begin taking firm control of your financial life now so that you will be better able to avoid debt problems later.