How To Stay Out of Debt

These are usually the common messages that I frequently receive in my inbox, people who are already deep in debt and cannot get their heads out of the water. This is not only the bad news, the other bad news is that many household in the country are deep in debt.

According to research around 69% of American household are in debt, so if you are one of them don’t be sorry because you are not alone. At the same time the average debt a household has is on the median of $70, 971, increased from the 2000 figure that tells American household has a debt of $50,971. This tells us that more and more Americans are getting in debt, out of proportion and is even getting bigger.

Let me tell you this, this is certainly a problem but a problem that can be solved. It only takes willingness to change your spending habits, money policy and some basic strategies, these are the secret. Well, it is not a secret anymore.

Yes, I know the American culture tells us to splurge and be the consummate consumer to buy things any time given a chance. But this does not mean it is right. You know why it is not right? Because you are now in debt and definitely struggling to pay it off on you meager income.

Here on this article I will share with you the basics of staying out of debt, if you apply these you will never have to worry about paying unnecessary interest on your credit cards, nor ever will you get into debt again. But as I said it will take some willingness and discipline to do these. They are simple and easy to put into application but willingness and consistency will be the key.

• Budget

Let’s be real, our common impression of those who want to stay out of debt are boring people with a boring life with a boring way of spending their days. Culture has dictated us to take a splurge the moment we have cash - most of the times with the money still to be had, when the opportunity to do so is given to us, this thanks to media.

It is a common story to hear about a household spending more than they earn. When they get a little hungry they pull up their credit card get online and order a feast of pizza, burger and fastfood. When they get bored a little bit they go out to the mall, shop for some fancy clothes, shoes and dress, oh and there are also trinkets they would have no use later on when they reach home. Got bored again, so let’s watch a movie and after that, treat ourselves for some fancy Italian dinner at an expensive Italian restaurant. Repeat this scenario several times and what do you have here is a credit bill longer than you can imagine. The real problem hits home when its payday and the take home pay is less than the credit card bill.

I will tell you that this scenario is common because you are guilty on some of these from time to time. Now how can you solve this? What’s the best approach to overcome this? You are spending more than you can earn, buying things that are more of a want than a need. A no no in terms of grounded financial intelligence and certainly not a financial practice that can lead you ahead in life.

Here’s what you should do, it is simple but very effective: budget your spending. This is simple but as it is obvious, hard to put into application. So how can you budget?

The trick is monitoring your budget expenses for a month, list down all your expenses. The take out fastfood, shopping for branded clothes, going to the movies plus dinner outs every chance you can have. Include also those spur-of-the moment spending. List all your expenses in a month and see where you can cut on your expenses. Of course, with the list you will now see that you have gone to the movies four times in two weeks, have gone to dinner seven times, and went on shopping for four times. Cut this off your list.

Now that your expenses have been cut, add this to your monthly bills and mortgages, this will be your monthly expenses. Put this against your monthly income. This way you already have a good picture of a well budgeted expense list. Every time you would go against your budget be mindful that you have no money for these kind of purchases.

• Make More Money

When you see that putting off payments for credit account and lowering your food expenses is not feasible, and you keep falling short of your monthly budget, then there is no option for you than to think of making more money.

I once advised a debt ridden client of mine on how to solve this budgeting issue by asking what his other skills are. He is an aircraft mechanic who takes his pleasure time on building websites for himself. He said he was pretty well versed in wordpress and its plugins. (the software for building web sites) I asked him why not offer his services online for a fee. I have to tell you that this client of mine made a thousand dollars in a week when he made a deal with an online affiliate marketer. Wow! He just got lucky. He had been doing this part-time ever since.

Now going back to making more money, it is only practical that since you have spent that much money that you have to come up with more money to pay it up. The story above is a success story because he found, by chance, a way to make money online and this was paid off his debt. You can also get a break like this if you have other skills.

What skills do you have that you can use to start a part time business?

• Credit Cards

Here’s the truth of the matter, people’s credit card use can be a habit that puts you in a deep hole. Staying off debt then means addressing your credit card use.

Just to give you a background on credit card use, American household has an average of over $15,000 credit card debt and as more Americans have several credit cards this just gets higher.

When you avoid using your credit card, it’s definite that you are far away from getting buried in debt.

But before I go on about on your credit card use habit, the first thing that can save you a lot of credit card debt actually begins when you start to get your card. How’s that? Before you get a credit card, shop around for the lowest interest rate, this may look unimportant but you will discover that every interest rate point matters. So what if you already have a credit card with a high interest rate? The wise thing to do is to replace it with a credit card charging at a lower interest rate. This will save you a lot of dollars in the process.

Now let’s go on to how you can get into that intelligent habit of using your credit card. When you want to use your credit card, think it through first. Of course, using our cash gets a feeling of sting when we buy something while using a credit card doesn’t have this feeling. What this gets you is to thinking that you are buying for something that you don’t have to pay for, while the truth is you are going to pay for it later and with an interest. Using credit card for purchases that can be paid by cash is throwing money away. If you can use cash for your purchases, prefer to do it this way, it’ll save you a lot of dollars in the end.

Another bad habit we often develop when using credit card is when you see a high balance, and you keep adding on to it. Some develop this habit, thinking that the balance is high anyway so why not use it instead. I’ll tell you that if this happens to you, when your balance is already high and you cannot make for the monthly payment, stop using your card until you have paid it off.

When you have nothing to use your card for, leave it at home. Most of the people who use their credit card make a spur-of-the-moment purchase for things that they didn’t intend to buy in the first place.

Try this as an experiment, leave your credit card at home and do your malling as you usually do. You will notice that you won’t buy anything. This would have been different if you had your credit card since temptation to purchase using it is great.

• Freedom

If you want to get ahead in life, staying away from debt is important. You will not experience financial freedom if you are saddled with debt burying you in a hole. Actually, staying away from debt is easy and it will only take a little change of mindset on how you spend your money and how you use your credit card. Apply the things I have shared here with you and sooner or later you will be backed on track on getting ahead in this life. Live Rich!

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