Nobody willingly walks themselves into debt. It’s one of those things that creeps up on you, and before you know it you are knee-deep, trudging in a hopeless financial quicksand. This is especially likely for young adults just transitioning from dependence to independence. Having to juggle bills, rent, groceries and other expenditures can come as a shock to a lot of people.
The only way to avoid these headaches is to stay alert to them. Be proactive about managing your finances, and you will be better placed to plan and take control of your life. Below are some serious, no-nonsense strategies that will help you steer clear of debts, keeping you stress-free and productive to enjoy the best years of your life:
1. Have a Fallback Emergency Fund
Emergencies can cause major disruptions to your financial plans, and they could force you into unexpected debts. The only way to stay safe is by preparing in advance for them by building an emergency fund. A general rule is to save at least six months of your salary. This will keep you going in case you lose your job or get an injury that prevents you from working.
2. Needs First, Wants Later
If you start by taking care of your wants, your needs will turn into emergencies that will force you to borrow. Review your budget and prioritize properly, placing importance on those things you cannot live without. Ensure your rent and food are taken care of before splurging on new clothes or the latest gaming hardware.
3. Budgets Keep You Sober
Without a budget, you’ll just be working with a rough estimate. This is a dangerously blind way to move. Before you know it, you are out of cash while still weeks away from your next paycheck. By planning out your monthly expenditure in advance, it will be easier for you to stick to the necessities and even parcel out some amounts into savings.
4. Limit Your Credit Card Usage
Credit cards come as a handy solution when we get tempted to spend more than we can afford. Self-control does not come easily to most, and a lot of people find their credit card debts spiraling out of control due to unnecessary spending sprees. Therefore, you should try to avoid them at all costs. And, if you follow advice #1, you will never need them as a safety net for financial emergencies.
5. Pay Your Debts on Time
In case you have to borrow money, make sure you make plans to repay as soon as possible. The longer you wait, the more difficult it will be to put them into your financial plans. In the worst of scenarios, you will find yourself having to borrow Peter to repay John, leading to spiraling debts and financial chaos. Keep track of the money you owe and give it priority in your budget.
Remember, it can be difficult to keep track of your finances, especially in the current fast-paced world. Therefore, take all the help you can get and always look for ways to increase your income while reducing your expenditure. A debt-free life will be worth the hustle.
Looking for more personal finance tips? Check out these 7 Smart Ways to Increase Your Savings.