“Saving is better than spending if you want to have a financially secure life”. We all know this simple fact of life and yet few people follow this age-old adage. The best way to deal with debt and avoid paying it off, is to avoid falling into the debt trap to begin with. After all, if you truly want to better yourself financially, you need to prepare for it likewise as well. Following are some of the key habits that (if you were to adopt them that is) might help you avoid debt:
1. Create financial balance in your life
Saving can be defined as “Putting aside some money for utilizing that amount later”. It is always essential to save at least a small part of your monthly earnings for the proverbial ‘rainy day’. If it is not possible to save hefty amounts at once, then try and save a smaller portion of your salary/income day in day out. However, it is imperative that the amount saved is done so with absolute consistency. Even if you manage to save up to only fifteen percent of your total earning every month without using your original savings, (thus defeating the purpose of the whole exercise) then within a short period of time you would be able to accumulate a fairly sizable sum that you might want to invest for further earnings.
2. ‘Create a relationship with your money
All relationships demand both commitment as well as time, and financial relationships are no exception either. This is why it is advisable for you to spend some quality time with your money at least on a fortnightly basis. On your ‘money date’, you may count your liquid reserves, make budgets, review financial goals and see how much you have been able to save though strict fiscal discipline. Should you feel that your objectives have not been met then you may draft a plan to improve your overall performance and try and follow it till the date of your next review.
3. Try not to pay off loans though savings
Once the hard decision has been made to save a certain proportion of your earnings, it would not be wise to squander away the savings that you have managed after many a self sacrifice, to eliminate your debt burden. Rather, it would be more fruitful in the long run to curtail entertainment and other frivolous expenses to not only pay off your loans but also make sure that you refrain from incurring newer and bigger debts. By effectively cutting down on your costs you would be able to live a relatively debt free life.
4. Use lower interest rate credit cards
Virtually all credit cards have different interest rates, with some banks having cards that turn out to be more expensive than their counterparts. It would be a wise move to shop around for a credit card rather than simply using the one that you already have, in case others might turn out to be cheaper. Ultimately, you should utilize the one with the least interest rates and simply cancel out the others. However, it would be more prudent to simply refrain from using credit cards in the first place. There are many well-known credit card comparison sites such as Quiddicompare that will help you determine what is best for you.
5. Pay More than the Minimum
However, should your credit card bill accumulate, it would be prudent to ensure that your monthly payments are higher than the absolute minimum. This is because minimum payments not only take too long to discharge your loan obligations, but also in the long run may well actually increase rather than decreases your loan, this is why it is imperative to pay off as much as you can and even a £50 extra would be a great help in this regard. Try using a financial calculator to see how much may be saved in this way.
6. Expenditure Journal
You should keep a monthly expenditure journal so as to be able to understand your own spending patterns for the duration of the month and how best to manage your budget.
7. Plan your meals
The answer to that most innocuous of questions “What’s for dinner” has the potential to do a hatchet job on the most well planned budget. If the answer to this seemingly innocent question leaves you stumped, then it is probable you would simply ‘order in’ and give your hard earned dollars to the delivery boy of your nearest eatery. Apart from making a mess of your budget, this habit will certainly do no favors to your waist. The simple answer is to plan your meals beforehand, at least a month in advance. Not only will you save money in the long run but both your wallet as well as your health would thank you for it.
8. Don’t try to keep up with the Joneses
Thanks to runaway consumer spending, we tend to mindlessly ape others more well off then us. If your neighbors have the latest model, giant screen LED 3D TV then let it be. It should not be a motivating force for you to set about acquiring one on your own if you cannot afford it. Remember, in case of an emergency you would not be able to sell that TV at its original cost but may well end up recovering only a fraction of your original investment.
9. Understand the gap between dreams and reality
It is always prudent to understand one’s financial limitations. Remember dreams are unending and they unfortunately tend to be markedly bigger than the salaries of most people. Trying to fulfill each and every dream would inevitably mean a lifetime of being indebted to others. This is why it is sensible to dream only what you can achieve and in effect spend a lot less then you actually intend to spend.
However, not all loans are veritable debt trap and indeed many credit loans may help us acquire not only what we may covet but also help tide us though our tough times. You may log on to the popular loan comparison site Quiddicompare to check out which one is just right for you.