Ways to Avoid Debt
Your Way to Financial Success
How You CAN Avoid and Manage Debt
Are you between the ages 15-21? That means you are just about to begin your desired career and there are some important points you may want to know. It is about time you get to learn about financial issues and how you can overcome future debt.
- One of the best ways to overcome debt is to pay your bills on time, by this, you will not be overwhelmed with bills to pay all at once.
- Charge with only what you are able to afford, you are at an age where you want to buy everything, rethink your decision about your NEEDS and WANTS.
- Limit your number of credit cards, more credit cards means more bills and if those bills are not paid on time, that can be a problem.
- When you pay a balance on a credit card, make sure you pay in full amount and not just half so you are not overwhelmed with money to pay later.
- Do keep a record of the amount of purchases by your credit card, by this you can keep with your account and know how much money is being spent. It is important to pay attention to credit card bills in order to guard against errors and fraud. Comparing receipts with the statement will ensure that you do not pay for unauthorized or mistaken charges. It is important to contact the credit card company immediately in order to receive protection from liability when fraud occurs.
5 Ways to Manage Debt
- Do not forget to save money! Paying debt off is great but if you are not saving money at the same time then you will be back at square 1 and really have not made any improvement.
- Be cautious of the interest rate! If you borrow at a variable interest rate the cost of your loan will rise as market rates go up. Plan for higher loan costs down the road, this will be more beneficial.
- Minimize regular debt expense. Minimize regular debt expense. Most debt must be serviced each month. Thus, it becomes an unavoidable regular expense. The larger such expenses are, the less flexibility you have. This is a key point for retirees, who may be living off their investment portfolios and be forced to sell stocks when they are low just to keep current on their debt obligations. So it may be wise to eliminate debt—even while loan rates seem favorable.
- Match assets and liabilities. This is a very important rule at banks, pension funds and insurance companies. This is a great way to turn from stocks to cash over a period of years when you are saving for college or retirement. The idea is to have assets available at the time you’ll need them. So avoid financing a long-term asset, such as a home, with a short-term loan from a credit card. You can’t use the value of your home to pay the bill. Borrowing long-term for a short-term asset spells trouble too.
- Maintain liquid savings. It’s not always possible to perfectly match assets and liabilities. That’s when it becomes tempting to dip into liquid savings.