Six tips to break up with debt
Staying out of debt does not mean rejecting fun in life – in fact, it’s all about embracing fun without the added cost and stress that debt brings. Breaking up with debt doesn’t have to be hard; there are many practical ways you can live a debt-free life and have the things they want without endangering your financial situation.
Curious? Here are six tips to break up with debt for good.
Develop a budget
Start collecting receipts and keep a log of your monthly spending, then categorize your spending into food, education, entertainment and so on. Once you have that information, you can combine it with your monthly bills to get a clear picture of your spending habits. Then, write your bills into a checklist and compare that to your monthly income. Any extra money you have at the end of the month will go to your savings account or can be used to pay down the balance of your credit account.
Remember to create expense items for your monthly food, phone bills and petrol for your car. Also anticipate the one-time bills and account for them in your budget. Most importantly, create an emergency account to make sure you have the money whenever you need it.
Learn to save
Take every opportunity to learn to do tasks that you would normally pay a contractor or professional to do. Change your own oil, wash your own car and do the gardening yourself. If you can do it yourself, you should. You will end up saving plenty this way.
Choose credit cards that suit you
Credit cards can benefit a person with good spending habits. When applying for a credit card, look for one that suits your needs. For instance, if you travel a lot, get a card that offers discounts in flight, hotels and cars rental. Also look for a card with the best cash-back feature to get extra money during the course of the year.
Use your credit card in a smarter way
The most practical way to use a credit card that offers rewards and cash back is for items that you have the cash to pay for. If you use your credit card to buy groceries, then you can get the benefits of cash back when you pay off the entire credit card balance with the grocery money set aside in your budget. Regular expenses that you know you can cover by cash are best for credit card spending – you do not have to carry the balance from month to month but you still get the rewards credits.
Save rather than spend
If you know that you can easily make a monthly payment on a financed item, you should also be capable of saving the money needed to buy it in cash. Saving for purchases is always preferable to opening a finance account for a practical consumer. Say you want to buy a new television but you are not in a hurry – the best idea is to develop a savings plan to make the purchase. Once you reach the goal, you can buy the item outright without putting yourself into debt.
When you find yourself struggling to pay for your credit card debt, call your creditors immediately. In most cases, they would offer a modified plan to make it easier for you to pay off your debt. Alternatively, talk to a professional financial advisor. Many companies like Credit Repair offer services to help their customers reach a debt agreement, which makes it easier for them to pay off the debt.
Yuan Liu is a freelancer who believes debt is the biggest obstacle in investment. From her personal experience, she finds the best way to avoid credit card debt is to simply stop relying on credit cards altogether.