Debt is one of the most poorly understood concepts in finance. Of course, when the national debt goes up, many of us consider it a bad thing. But without debt, the entire financial system would collapse. The obligations springing forth from debt can help move entire industries, or even keep investments flowing.
However, when managing our household finances, doing our best to limit “bad debt” and manage “good debt” is an important focus to keep. Now, this is easier said than done. After all, those of us who may have a mortgage, take a loan for a vehicle, or just need a little help to get to payday may take on debt we can pay off and agree to in reasonable terms. In general, there’s nothing wrong with this, provided you manage it capably.
In this post, we’ll discuss five habits you should curate to not simply remain debt-free, but to avoid bad debt, and to make sure your financial obligations never spiral out of control
- Limit Financing As Much As Possible
While it’s true building credit can be achieved by taking out financial agreements and repaying them on time, limiting this as much as possible is a great idea. To build credit, a better option is to take out a credit card and make minimal payments on it each month. So you might pay for your groceries using the card and then immediately pay off the balance.
- Understand The Warning Signs Of Too Much Debt
The truth is that the warning signs are there, as Alex Kleyner National Debt Relief lessons show. Before debt gets out of hand you can use charities that help consolidate or manage where appropriate. Spotting the warning signs is key, such as relying on debt more for your daily living, or having trouble with multiple payments.
- Consider Schedules & Cash Flow
Often, debt is not just about what you pay, but what you can pay right now and how your cash flow operates. If you need to pay a bill on the 10th but you don’t get paid until the 28th, this is a real problem that needs to be addressed. Considering schedules and cash flow in these circumstances is important, and having bills taken on a specific date can help you avoid extra charges or unwanted fines.
- Track Your Expenses
Sometimes, just having the space necessary to tracking expenses can make a massive difference. This might include using budgeting apps, spreadsheets, or round-up software to help you understand, down to the penny, how much is going out of your account each week. This will help you make life adjustments where needed and limit bad habits.
- Curate Financial Goals
When you’re aimless in spending, it’s easy to just pay for things without thinking about them outside of your conventional bills. Having some financial goals to hand can be a great idea, like saving for a deposit or trying to save 10% of your salary each month. It will give you the parameters and motivations for avoiding bad debt as much as possible.
With this advice, you’ll be certain to focus on the best habits for remaining debt free.
