According to Experian, the average American in 2020 owes a whopping $92,727 in total debt, which is the highest amount recorded.
7 Ways To Ensure You Don’t End Up In Debt In The Future
The numbers also revealed that the most debt is carried by Baby Boomers, Generation X, and Millennials, in the form of student loans, personal debt, credit cards, and mortgages.
So, before it gets out of hand, you should start taking measures that can help you with controlling possible debt in the future. Here are a few effective ways to ensure that you don’t end up with a hefty debt.
1. Think About A Side Gig
If you are currently in debt or think you might be, then one of the reasons for that is the lack of surplus income. Your current mode of income isn’t enough to cover the expenses of your lifestyle, so why not create more ways to earn extra?
One of the best ways to cope with debt is to start a side gig that can help you earn a decent amount. It can be something as easy as selling stuff online or as big as starting your own business.
2. Seek Help For Experts
Taking help from a professional or seeking advice is always a wise option for managing your finances. You can benefit by taking help from various financial advisors for debt management, insurance, and even estate planning.
Since real estate is a very profitable market, you should consider an expert in estate planning and get to know how you can avoid paying hefty amounts in taxes.
You should particularly seek a professional with an estate planner certification because such individuals can keep you up to date on recent alterations in taxation.
You will also have a beneficial estate and tax plan that will help you manage your debt by not throwing your money away needlessly in taxation.
3. Live By A Budget
The first piece of advice that anyone would give you about financial problems is budgeting. Everything is so much better with a budget because unless you don’t know your financial limits, you will never be able to control your debt.
A budget helps you keep track of your expenses by telling you that you can’t spend more than you earn. So, let your creative juices flow and develop a budget planner that is fun and motivates you to save something for the future.
A personalized budget will help you make a financial plan which will ensure that you live debt-free.
4. If You Can’t Afford It, Don’t Buy It
The golden rule of avoiding debt is to hit the brakes on your expensive shopping sprees. We all know how amazing it feels to buy the latest designer bag or bring a gigantic flat-screen TV, but at what cost?
To top things off, people think that paying with credit cards means that you can afford anything you want. However, it’s just an illusion under which is the reality of debt.
Therefore, make it the ultimate rule of your financial plan that if you can’t afford it without a credit card, then you aren’t buying it.
5. Pay Off Your Credit Cards In Full
Delaying credit card payments or paying them in installments isn’t a cheap deal. You end up paying more than for whatever you bought. Therefore, one of the best ways to keep your credit card debt at bay is to pay it in full whenever possible.
It may seem difficult at first, but you’ll soon realize that this is the best way to keep your spending under control. Moreover, if you got a wallet full of cards, then it’s time to take some extreme measures.
As mentioned before, having loads of credit cards only give you the illusion of affordability.
6. Reconsider The Interest Rate
If you want to ensure that you are debt-free in the future, then start refinancing. Even though credit card rates continue to climb, interest rates for mortgages and personal loans are still comparatively low.
So, what you can do is negotiate a lower interest rate with your creditors based on your payment history. A lower interest rate will help you save money and pay off some of the debts, or you can also take up a personal loan at a lower rate to pay off existing debt.
You’ll need to prioritize your debt and try paying off debt with higher interest rates first.
7. Cut Expensive Hobbies
You shouldn’t feel guilty about having expensive hobbies because who doesn’t like to spend money on good things? However, if you wish to enjoy a carefree and debt-free life ahead, then you’ll need to make some sacrifices today.
Ask yourself, is it really worth it to buy a $500 purse when you can save that amount for future endeavors? Remaining out of debt along with enjoying your life is all about prioritizing and planning.
For instance, if you choose savings over expensive hobbies at the moment, then you might be able to afford the same stuff in the future without being indebted or feeling guilty.
Keep Track Of Your Expenses
Keeping track of your expenses and monthly spending is essential for anyone who uses multiple cards and accounts. By keeping track of your expenses in a sheet, you can easily manage to make payments on all your cards at the correct time.
Also, you will always have a complete picture of your finances and spend accordingly. If you don’t like using apps or Excel sheets, go old-school and use the envelop system.
Conclusion
It is a great way to save money because it hurts to see that much money going out of your hand when you are paying in cash.
Debt is a slow poison that hurts you when you are most vulnerable. Therefore, work on the above tips and make your future debt-free.
Ensure that you aren’t overusing your credit cards and keep as few cards as possible. Create a budget that isn’t too strict but lets you save enough for emergencies.
Remember, if you wish to be financially successful, get rid of your debt as soon as possible.
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