Who likes debt? Too much debt can get you into so much trouble and leave you in a position with no room to breathe. Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. In other words, you owe money to someone. Find ways how to avoid getting into debt.
Most of us has, at some point in our lives, have had debt. Examples of debt include auto loans, student loans, credit card balances, alimony, child support, mortgage, and any other form of financial obligation. For this post, I will be using debt references to the more common examples such as auto loan, credit cards, and mortgage.
If you are in debt, let’s first understand how you got there so that you can figure out how to get out of it. Debt means that you owe money to someone.
You spent more money than you earned
Do you have a credit card? Do you use it for all your purchases not realizing how much you’re spending? Credit card companies want you to spend and keep a balance so you can pay interest on it. Why do you think they’ll give you a card with such high credit limits? It’s easy to swipe and keep swiping, racking up purchases you can’t repay.
You borrowed money that you should have
Are you paying off your car or mortgage? This means you borrowed money, likely from a bank, and you’re now paying it off. If the payments are too much and it’s difficult to pay, did you buy a car or house that may have been out of your budget? Everyone likes a nice house in a nice neighborhood, a nice car with all the electronics and performance. But can you afford it? If you’re having trouble making payments, it might be out of your budget.
So you’re in this bind with debt and you want to get out. I call it, how to stop the financial bleeding. First, track all your expenses and create a budget for yourself. In order to get out, you need to be bringing in more income than you have expenses. This might mean giving up that nice car for an older one or possibly getting rid of it. Whatever it takes, stop the financial bleeding! This may take a while depending how much debt you have.
Once you’ve identified what got you into debt, try the reverse so that you avoid getting into debt again. For example, did you overuse your credit cards? Start using a debit card. Don’t allow credit to lure you back into debt.
Was the last car you had more than you could afford? When you’re in the market for another car, look for one that’s more affordable and within budget. Consider a used or certified pre-owned car.
Were you ever on a budget, tracking and limiting your expenses? Probably not if you were in debt. Start a budget and stick to it.
Were you financially knowledgeable or inexperienced with finances? Start financially training yourself. Listen to podcasts, YouTube videos, or financial blogs.
Having an immense amount of debt isn’t fun. What you can do is understand the things that can get you into debt to get out of debt. Look out for those debt indicators early so to prevent it growing larger and larger. No one is financially perfect but being financially aware of your finances is a must. If you are interested in following my journey, email subscribe to get alerts of latest posts or follow me on Facebook.