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It’s easy to swipe here and swipe there and simply finance your life with plastic. A lot of people do this. According to TransUnion, the average American has around $5,733 in credit card debt. Maybe this happened without you noticing? Or maybe you feel as if it’s out of your control?
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Either way, finding yourself in debt can be stressful and overwhelming. And if you find that you’re unable to pay for a prolonged period, you can easily get trapped.
Here are six strategies you can implement to prevent making these mistakes and avoid falling into debt:
1. Using your credit card for everything
It’s easy to swipe your credit card to get what you want now and think about paying for it later. The problem is that later will come faster than you think. If you can’t afford to pay cash for an item, then you can’t afford it. Swiping your credit card without thinking is an easy way to fall into debt.
2. Not having an emergency fund
Financial emergencies can strike at any time, whether it’s a medical bill, car repair, or unexpected job loss. Without an emergency fund, you may be forced to rely on credit cards or loans to cover these expenses, setting you on a path toward debt.
Aim to build an emergency fund that can cover at least three to six months’ worth of living expenses to provide a safety net so you won’t have to rely on loans or credit to see you through.
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3. Putting off paying your bills
Pay your bills – credit card balances, loans, rent, etc. – on time and in full each month. Otherwise, you will end up with late payment fees, increased interest charges, and larger balances needing to be paid off the next month. Automating payments can help ensure you never miss a due date.
4. Not Prioritizing
Sometimes, peer pressure or societal expectations can lead us to spend beyond our means. It’s crucial to assess your financial priorities and focus on what truly matters to you. By aligning your spending with your values and long-term goals, you’ll be less tempted to accumulate debt on frivolous purchases.
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5. Spending without thinking
Creating and sticking to a budget is a fundamental step in managing your money and staying out of debt. A good budget will take into account your income, expenses, help you save, and give you fun money that you can do with as you please.
If you know how much fun money you have it’s easier to limit impulsive purchases that can lead to debt. Use budgeting apps or spreadsheets to make this process easier and more effective.
6. Getting credit card cash advances
While credit cards cash advances can give you cash fast they are expensive. They typically come with fees, high interest rates, and accrue interest immediately. Avoid this costly trap by using your credit card solely for planned, budgeted expenses and not as an ATM substitute.
The Bottom Line
Staying out of debt often comes down to being in control of your finances and unfortunately limiting yourself. In our consumer culture, it’s easy for spending to spiral out of control. Companies spend millions on ads each year to get you to do just that. But you don’t have to listen.
Apply these strategies, rein in any potential debt, and focus on your priorities so you will still have money to spend on yourself. Yes, it’s not easy, but the rewards are well worth it.
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