If there is one thing in life we all want to avoid, it is debt.
We all want to live a life free from debt as much as possible. And it is understandable why this is so. Having a debt to pay off is like a living death, for you know that it is a liability you can’t escape from.
Indeed, almost all of us would like to know how to stay out of debt.
In spite of this, likely, people will eventually end up getting stuck in debt, due to one reason or the other.
It may happen overnight, or for that matter, accumulate over time. Regardless, the result will be the same, an immense amount of worry and stress every single day.
If you wish to avoid debt in life, there are a lot of different things that you can do.
From the simple to the not-so-simple, there is a multitude of strategies you can use to avoid the debt trap. Given in the list below are some of the most useful answers to the question of how to stay out of debt.
Live below your means
This is one of the most important things you will need to understand if you are wondering how to stay out of debt. It doesn’t matter how much you earn, for you will eventually end up in a financial mess if you don’t understand this.
Most people tend to grow their lifestyles with their income. They don’t maintain their lifestyle the way it exists right now. Instead, they increase their expenditure as their income increases.
What this means is that the more they earn, the more they spend, and the less they end up saving. It is for this reason that even people who are incredibly wealthy tend to have vast amounts of debt. It is for this reason that one must live beneath one’s means, rather than above it.
In other words, only buy what you can afford if you would like a sound answer to the question of how to stay out of debt. There is no room for loans here, other than perhaps that of home loans or auto loans.
Increase your earnings
Creating a debt repayment plan is one thing. Having the finances to pay for it is another.
This is where increasing your earnings come into the picture. There is only so much money you can repay with your current lifestyle. If you desire to pay off your loans faster, you will need to increase your credits by a vast amount.
Work on increasing your income, either by changing your job or starting a business. The faster you can make money, the quicker you will be able to pay off your loans. There is simply no better answer to the question of how to stay out of debt than to increase your earning potential.
Stay away from credit cards
Credit cards are mostly a debt trap. If you are searching for the right answer for how to stay out of debt, this would be it. It’s mainly the case if you use them a lot and not bother to pay back the money.
And it’s not the money that is the culprit, but rather the interest. The interest gets compounded over and over again, with the final amount often grows exponentially with the passage of times.
Should you have credit cards, cut them up, or use them sparingly. If you do end up using them, make sure that you pay the total amount at the end of the month, preferably before the interest kicks in. Do note that credit cards don’t seem harmless at face value. But rest assured that if you aren’t careful with them, they are.
Stay away from loans as much as you can
Avoid loans as much as you can. There is no need to go for a loan if you can pay for something whole.
The only loans you should be going for, at most, are for significant expenses such as a home, car, or education.
Beyond these expenses, you should opt for upfront payments as much as you can. The answer to how to stay out of debt is clearly at this particular point when you think about it. Just stay away from loans as much as you can.
Spend your money on assets instead of liabilities
Too many people spend their money on things that don’t depreciate. In other words, they buy things that lose their value over time.
Instead, work on purchasing things that accumulate value over time.
Examples of liabilities include electronics, trinkets, junk food, pointless shopping sprees, etc.
Examples of assets include gold, silver, property, shares, etc. This is not really a direct answer to the question, how to stay out of debt. At the same time, however, it is an indirect one that you can work towards in life.
Avoid buying unnecessary things
Buying unnecessary things is perhaps one of the most significant sources of the financial drain in people’s lives.
A few purchases here and there don’t mean anything. But they all add up. Avoid unnecessary purchases as much as you can, if you want a quick answer to the question, how to stay out of debt.
Create a budget to manage your finances
There is only one long term strategy to manage your finances. Create a budget. Only with the creation of a budget will you be able to maintain your finances properly.
Don’t distribute credit cards like candy
This is a rather odd thing to read, but it is very much right.
Many people try to be generous with their family, partners, or even employees by giving them credit cards. This can be somewhat problematic when they are abused.
Keep strict control over who uses the credit cards under your name.
Don’t sign surety papers for loans
Quite often, loans issued by banks and other parties require another party to be a ‘co-borrower,’ to offer them surety or a guarantee that the loan is repaid.
This is done to ensure that if the primary borrower defaults, you will pick up the remaining burden.
Doing this is very risky, and will have to be well thought out and considered, before you sign on the dotted line.
If you want a useful answer to the question of how to stay out of debt, this is one option you shouldn’t ignore.
In all, if you are wondering how to stay out of debt, you aren’t the only one. Debt is one of the worst things in life you can have, no matter who you are.
And having it haunt you day after day is certainly not the right way to live.
But at the same time, it is not a significant problem unto itself. It is only when you allow yourself to get into it that it becomes one. Spend some time on managing your finances in the right way, and you will be able to avoid debt, perhaps entirely, for the rest of your life.