Life is full of moments of bad timing.
We get bombarded with tips and help to get you out of credit card debt once you’re there. But what about keeping you from that point in the first place?
Well, I’m going to give it a shot and put forth 10 tips to help you stay out of credit card debt, even before you get there.
1. Live Within Your Means – I really could stop at this first point. Managing your finances properly really comes down to this single point: just spend less than you earn on a consistent basis. If you use your credit card (for points or whatever), just make sure you can pay it off in full each month.
2. Create a Budget – An obvious next tip to help you live within your means, is to plan to do so. A budget, however simple or complex you make it, is simply a plan to spend what you earn. Obviously you wouldn’t plan to spend more than you earn, so creating a budget is a natural way to help you there.
3. Reduce Your Expenses – Overtime our expenses can creep up on us. Once you’ve set up your basic budget, look for ways to cut back on expenses. Is there an expense for something that you aren’t using? Is there an expense that could be reduced with discounts or coupons?
4. Focus on What You Have – Credit card debt often comes because we want to have more, more, more. Here in America, most of us really have all that we need. Learn to find contentment in the things that count: friends and family. Stuff is just stuff in the end.
5. Increase Your Income – To keep the “means” above the spending, find ways to bring in extra income. Take a part-time job. Ask for a raise. Start a business on the side. There are many ways to increase your means and stay above your naturally growing expenses. Plus, while you’re growing your income, you’ll forget all about spending.
6. Create an Emergency Fund – One of your best allies in staying out of debt is to self-insure for small emergencies. True insurance can help a great deal for major events: auto accidents, major sickness, death, etc. But what about the emergencies that you can’t get insurance for: a job loss, out of pocket medical, and insurance deductibles. These expenses can really crush your budget and send you to your credit cards again. Creating an emergency fund of a few months’ expenses will help you avoid that.
7. Keep Your Skills Sharp and Networking – Many people go into credit card debt when they lose their job. If you can limit your time of unemployment, then you can limit the amount of time you need to rely on credit to get you buy.
8. Be Properly Insured – Make sure you have adequate insurance of all types: auto, home, life, medical, even supplemental if your cash can’t get you buy in the short-term.
9. Hang Around the Right People – You’ve heard the expression: “keeping up with the Joneses.” Don’t do it. Find friends and family who will support you in your efforts to live within your means. You don’t have to be like everyone else, mortgaged up to the hilt and barely making it by. Dare to be different and encourage a positive financial life amongst your friends.
10. Put Your Cards on Ice – I’m partly kidding here, but if you are on the brink of breaking out the credit cards to do some major damage that you’ll regret, put them in some water and throw them in the freezer. You’ll have plenty of time to talk yourself out of a purchase when you’re over the sink thawing out your card.
As an aside, you should know that I’m obviously not against credit cards in general. I just don’t like to see them used irresponsibly. And I certainly don’t like seeing people in debt up to their eyeballs, incurring interest and credit card late fees.
What helps you to stay out of credit card debt?