The vast majority of us know in principle precisely how to avoid debt but the reality is that – as with so much in this life – the theory does not always translate in to practise.
The most important step of all if we are to successfully avoid debt and perhaps getting in to excessive debt is to take every step we can to ensure that we always have funds squirreled away in an emergency fund. There are times in all our lives when we are hit with expenses which we simply did not anticipate and if we do not have something put away for just this eventuality, debt is the most likely outcome. We should ensure therefore that whenever we receive our weekly or monthly pay, we put what we can afford in to a savings account to serve as both a potential emergency fund and a potential nest egg for our retirement.
If there is a large purchase which we wish to make such as a car or a new kitchen, for example, the temptation is to borrow the money, make our purchase next week and pay the money back over what will most likely be a fixed period of time. This, however, whatever way we may dress it up, is debt and if we are serious that we are going to avoid debt, we must determine that we are going to save for our purchase. In this instance, we must not make the mistake of dipping in to our contingency fund but instead either open a new savings account altogether to accumulate the cost of our luxury item or increase the subscription to our existing account for the necessary period of time.
Credit cards are inevitably the most common way in which people not only get in to debt but get in to trouble with debt. They are a convenience which all too often can lead to spending on items which we can not afford and even do not need. We see something, we have our credit card with us, so we buy it. Alternatively, we may use our credit card to buy something, intending to pay the bill off in full at the end of the month, but are distracted from doing so by some other “necessary” outlay.
The best way to avoid debt on credit cards is of course not to have a credit card in the first instance. This is not always practical, however, in a world which is dependant more and more on electronic payment systems. What we must ensure is that we maintain rigid control of both our credit card spending and our clearing of our balance at the end of each billing period. If we slip up once and do not clear the balance in full, we must make doubly sure that we do so the following month.
These guidelines provide some idea as to how to avoid debt but the likelihood is that at some time in our lives we will incur same. What we must do at such times is ensure that we stay in control of it and do not get to the stage where our debt controls us – or then we really are likely to have problems.