Nobody likes the situation of being in debt. It is simply one of those things that you feel it’s out of your control, or happen unnoticed. However, there are things you can do to get out of debt, you may ask how long does a debt management plan last? And even though they may take time, you will avoid getting trapped into the debt hole. Here are some of the strategies you can start implementing today.
1. Have an Emergency Fund
Emergency situations are unavoidable and unpredictable. Unfortunately, many people don’t have emergency funds that can help them when they find themselves in a car accident, a plumbing issue, or a medical situation. So, consider having an emergency fund account with savings of at least 6-months. This will help you have something to turn to when you even lose that job or an injury prevents you from working.
2. If You Cannot Buy it With a Credit Card, Do Not Buy It
One of the saddest things about having a credit card is that most people get into the illusion that they can buy things they can’t afford. A good rule to follow is that if you cannot afford to purchase it with cash, then you cannot afford it with a credit card. So, if you don’t want to get into debt, do not buy something you cannot afford with your own cash.
3. Focus on the Needs, Eliminate the Wants
If you find yourself in debt, then there is room in your monthly budget to get rid of unnecessary spending habits. So rather than that ‘Taco Tuesday’ every week, move it to once a month. Reduce your online spending habits, take homemade lunches, and cut back on going to the cinema every week. There more you shave, the more money you will have to clear your debts or invest in other practical things.
4. Have a Practical Budget
One of the best ways to clear or avoid getting into debt is by having a practical budget. By budgeting your weekly or monthly expenses, you will be in a better position to track where your finances are going and where you can better spend them. On a monthly basis, figure out how much to put towards savings, retirement account and how much extra you have to spend on essentials. So, if there ever comes a time where you need to do a substantial cut-back on expenses, you’ll know exactly what to eliminate. Handy tools like Money Manager will come in handy for such organization.
5. Pay Off the Credit Card Balances in Full
Another way to keep your spending habits under control is by paying your credit card balances as you go. For instance, when you buy something with the card to earn rewards, make the payment as soon as possible before other things in your life get in the way.
6. Avoid Using Credit Cards for Cash Advances
If you use your credit card to get cash at hand, chances are you’re abusing your finances. The APR is not only higher compared to conventional purchases, but you will be charged a fee as well.
7. Limit the Number of Credit Cards
Having multiple credit cards means making multiple payments and several situations tacked on interest. This is nothing but a setup for the ultimate need to consolidate your debt if you are unable to use the cards in a responsible manner. The more charges accumulated on each credit card is a quick way to get into debt.
8. Keep Track of Your Expenses
Consider keeping track of your expenses on a master sheet that you can update on a monthly basis. This way, even if you have multiple cards or accounts, you will keep track of everything and be able to make full payments on time. A tool like Money Manager should help you gain a full picture of your finances, including credit cards, loans, accounts, investment accounts, savings accounts, etc.
9. In Case of Salary Increase
If there comes a time where you get a pay rise, continue with the lifestyle you have before and put the extra money in savings. After all, you have managed to make it this far. So, be wise and put that money where it will work for you and create a better future.
With these tips, you should be able to manage your finances better and avoid being stuck in debt.