While
debt is not necessarily a bad thing, being over-indebted is and is easy to fall into. By following these ten principals, you can avoid falling into the debt trap.
- Drawing up a budget for each month is essential, but not as much as sticking to it. Review your budget every month and determine areas where you are failing to live up to your budget to cater for this next month.
- Don’t fall behind on your payments. This accumulates interest which adds to your debt. Defaulting on any one payment could lead to you losing control of your debt.
- Save. If you can wait to own something, save up for it instead of buying it on credit, and if you buy on credit make sure you can afford the interest and repayments.
- Keep a savings account of at least 3 months income is always a good idea, for any unseen occurrences.
- Reserve savings for various expenses, including retirement, vehicles or medical emergencies.
- Negotiate. Try and negotiate rates and big purchases. Asking for discounts often yields positive, albeit small, results.
- Understand the interest thats being charged. Make sure you know how much extra in terms of interest you are paying before signing a credit agreement.
- Be realistic. Make sure your spending doesn’t exceed your income and if it does, either decrease your spending, or increase your income.
- Buy on sale. Wait until something goes on sale before buying it, even if you can’t wait to save up for it.
- Work out your net worth. This means adding the value of all your equity and subtracting all your debt combined. The goal is to always be in the positive.
Applying these tips will help you remain debt free, to avoid the process of
debt counseling or consolidation.