How to Avoid Getting Over Your Head in Debt

Not to sound confusing…but the way out of debt is to avoid getting into debt in the first place.  Yes, you can regulate your cash flow sensibly and avoid financial hardship later.  Of course it sounds easy but the temptation to spend more than you make is hard to resist.  But with some determination and self-discipline you can certainly avoid getting over your head in debt.  Follow these challenging but practical steps to learn how.


Budget your income
1. You should budget your money each time you get paid.  Set aside enough funds to pay your expenses first… then put some away.  Don’t spend any money on luxury items until you pay your bills first and save some.  Try not to deviate from your budget, but stick to it.

Put money away
2. You should make it a point to subtract money from your pay every payday and put it in your savings account, 401K, money market fund, retirement account, credit union, purchase CDs savings bonds, and any other savings account that you might have.  Once you start saving don’t make it a habit of withdrawing funds to purchase unnecessary items.

Pay your bills on time

 3. Make sure you pay your bills on time.  Don’t wait two days before your payment is due to put your check in the mail.  If you insist on paying your bills by mail you should mail them out at least one week prior to the due date to ensure that they are received before the due date.   Keep in mind that you will be required to pay late fees when your payments are late.  Too many late payments will increase your monthly payments and lower your credit scores. You might want to look into paying your bills on-line to avoid late payments for reasons such as the mail delivery was slow or your check was lost in the mail.

Pay your bills before the due date

4. You should make an effort to pay your bills before the due date, this way you will be sure to avoid late fees.  For example if your bill is due on the 24th, you should pay it by the 22nd or the 23rd.  Your consistency in paying your bills before the due date will help drive up your credit scores.

Spend money on necessities first
5. Your basic necessities are your food, clothing, shelter, and medical expenses.  You should always pay your mortgage or rent on time to avoid foreclosure or eviction.  Of course you should by food to eat and clothing to wear.  If you are on medication and need your prescriptions filled regularly, this is a necessity as well.

Limit your spending
6. When you find that you have to live paycheck to paycheck to pay your bills you may be spending money that you don’t really have.  Once you take care of your basic needs and make your savings deposit, it is OK to buy some luxury items and treat yourself, just don’t over do it!

Keep your charges to a limit/or avoid charging
7. One credit card is good to have if you know how to use it wisely.  You should never charge to the limit and you should keep your payments current.  However, if you find that you cannot resist charging everything in sight…it will be best that you refrain from charging anything.  You should use a secured debit card or pay with cash instead.

If you have credit cards that you have maxed out, you should cut them up immediately and work towards paying them off.  Excessive credit card use will only drive up your monthly payments and will land you in debt fast.

Stay employed
8. If you are currently working you should continue to work until your retirement or until you are financially able to quit.  A steady flow of dependable income is necessary in that it pays your bills.  If you don’t like your current job, don’t quit your job prematurely but wait until you have another job lined up.

Pay with cash

9. And finally, when making your purchases you should use cash so that you won’t have that burden of paying for it later along with those outrageous monthly interest fees.  If you find that you are unable to pay cash upfront then perhaps you don’t need it now.
If it’s something you really want just wait until you have saved up enough cash…then purchase it later.  You should keep track of your expenses so that you will know exactly how much you are spending. Your expenses should never exceed your income.

Tips:
*shop for and purchase only affordable housing, attire, and motor vehicles
*If you must use credit cards for travel, or in emergency situations, etc., use them responsibly
Warnings:
*carefully scrutinize the monthly interest rates and other fees for credit cards before you start charging
*avoid payday loans