Most people consider debt a normal part of life. It is a quick means to an end. It allows for instant gratification. In many ways you get a big pay-off for a seemingly small amount (monthly payments). In fact we have been so conditioned that many people balk at the ideas that will keep them from carrying debt their entire working lives. Here are five tips for avoiding debt.
1) Begin planning now. It sounds simple, but it is a very effective way to avoid debt. Most “emergencies” can be planned for now, so that you can avoid going into debt for them. You should have sinking funds set up for car repairs, home maintenance and medical bills. These are often considered emergencies by those who are unprepared to meet them. In reality they are simple facts of life, and eventually you will need to be able to take care of them.
2) Begin saving now. If you know that you are going to purchase a new car, new home, or maybe a new plasma TV, you can include that item in your budget and begin to save for it. Then you simply wait until you enough to purchase the item before you go and get. In the case of the home you should actually just save up enough for a good down payment.
3) Create a budget, and track your spending. If you are able to successfully stick to your budget and live within your means you will be able to avoid debt. This is a simple way to avoid credit card debt. Many people hate to budget because they look at as time consuming and restrictive. However the positive effects of budgeting far out weigh the negative effects.
4) Avoid taking out a second mortgage on your home. While it is difficult to purchase a home with cash, which makes a mortgage necessary, a second mortgage is really never necessary. You are simply cashing out an asset that you can use later in life to finance your retirement. A second mortgage may be advertised as a way to take care of your other debts, but unless you change your habits, you will continue to run up debt.
5) Pay off your mortgage as quickly as possible. Although many people claim that a mortgage is a tax break, you are still paying more on interest than you get back on your taxes. You are not getting that big of a break. Once you pay off your mortgage you will have more money available to you, plus you will own your home.
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