How To Avoid Debt

And How To Manage It When You Have It

What Is Debt?

Debt is defined by the dictionary as the state of owing something, typically money. A debt generally refers to money owed by one party, the debtor, to a second party, the creditor. Being in debt can have dramatic consequences on a person, and can cause them to have stress, anxiety, fear, panic, and anger. The rest of this newsletter will be dedicated to teaching young people like yourself how to avoid debt, and how to manage it if you have it.

How To Avoid Getting Debt

  1. Only pay for things that you an afford - When using credit cards, Avoid the mistake of using them to buy things you really can’t afford. If you can’t afford to pay in cash, you probably can’t afford to charge it.
  2. Budget your money - Monitor your spending by keeping an expense log and receipts. Keeping track of and limiting you spending will ensure that you have money for important bills and expenses.
  3. Pay you balances, in full, monthly - By paying off your balance, you won't have to worry about paying the minimum payment, because your card will already by payed off. This also prevents balances from adding up. The longer you don't pay your balance, the more interest will be added. If it helps, think of your credit card balance as a snowball that grows larger as it rolls downhill.
  4. Save rather than spend - Figure out what purchases are most important to you and create a savings plan that will help you to save the money you will need to purchase them.
  5. Avoid balance transfers and keep the number of credit cards you own to a minimum - When transfers are balanced from one card to another, your balance will increase due to balance transfer fees. In addition, the more credit cards you have, the more you can charge. These two factors add up and can increase you balance greatly.

How To Manage The Debt You Already Owe

  1. Decide which debts to pay off first - the one with the highest interest rate is the one that costs you the most money and should receive priority in terms of repayment. However, you can also chose to do the opposite, and make the smallest debt your priority. Use your debt list to rank your debts in the order you want to pay them off.
  2. Try to at least pay the minimum payment - Paying the minimum payment will prevent your debt from growing. When you miss payments, it gets harder to catch up and you will fall further into debt.
  3. Use a budget to plan your expenses - Keeping a budget helps ensure that you have enough money to cover your expenses each month. A budget can also help you plan to spend any extra money you have left, after expenses are payed, to pay off your debt faster.
  4. Keep an emergency fund to "fall back" on - Use this to cover any sudden emergency expenses without needing to borrow, and thus prevent your debt from increasing.
  5. Minimize your regular spending, and don't forget to save - By limiting your spending and saving up, you are able to efficiently plan your payments and not only pay off your debt, but also prevent yourself from falling into it in the future.