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Debt is the money borrowed to an individual or entity. It should be returned or paid off within the set deadline or schedule. Examples of debts are mortgage loans, car loans, student loans, and credit card balances. Staying debt free in today’s society has become harder than ever before with the growing level of inflation reducing the value of every dollar you earn. Sounds scary doesn’t it?

Reducing expenses and taking on board some tried and tested saving tips will help you to better manage your money, staying debt free for as long as possible. Avoiding borrowing huge amounts of money should be every buyers goal. Many consumers believe financial responsibility is related to having a debt and enjoying what you want to buy through a loan or the use of a credit card. The truth of the matter is that it’s actually the other way around.

Financial Foresight

commercial collection agencyPlanning your financial expenses is a two-part process:

First, you need to learn the basic principles of spending and saving that will determine how you will use your finances. Once you have understood the policies, you need to strictly practice the policies and learn from them. Instead of being compulsive and splurging your money on unneeded items, take some time to understand what good spending is all about. This gives you the opportunity to live a better life without falling into the risks of having a debt. This is true for your personal finances as well as any commercial finances you can control. Commercial spending can be high risk and many business owners fail to see the warning signs of over spending. Commercial collection agency The Collection Law Group stated that many of the businesses from which they seek payment of past due invoices come from business owners who fail to keep their ledgers in order, resulting in overspending.

Secondly, translate good personal financial planning policies into daily living. If you are dedicated to ensure wise spending and saving, it should be part of your decision-making process. Make it a habit to think first before you buy anything. Consider the value of the money and worth you are putting into something. Make decisions while considering what is best for your personal finances. Through this method, you will begin to understand what it means to be debt-free.

Avoiding Complications

Paying off debt or staying out of debt can be tiresome at times especially if you fall behind. It’s better to be prepared during these instances and avoid getting into a loan situation where you might be penalized for delays through extra fees or higher interest rates.

Shifting Credit Cards

Staying Debt Free

Don’t choose credit cards with high interest rates. Settle for a card with a lower rate but ensure you fully understand the credit card agreement before signing for a membership. Whenever possible, consolidate your credit card debt. Shift your largest high-rate balances to a card with a low rate and ask if you can pay it down. Many cards offer 0% balance transfers for the first 6 or even 12 months so take advantage of these deals. However it’s important to make sure you can pay off the sum of the balance that is not transferred so you’re not stuck making extra repayments.

If you can live without credit cards, stop using them unless necessarily or make them for emergency cases only. If you have multiple cards, cancel those that you don’t really need or frequently use. Close the inactive accounts to minimise fees. Check first the terms of use as some issuers charge a higher interest rate on the remaining balance especially for those who close accounts. If this is the case, pay first the balance then cancel it.

If you have savings, pay off some of your debt gradually. This makes sense as your money in your savings account only earns an interest of 3.5 percent while the amount of your debt charges 15 percent or higher.

Tracking Your Expenses

travel expenses

One way to check how much you are spending is by documenting your expenses and evaluating your receipts. Categorize your spending into different groups such as entertainment, travel, food, personal and work. Once you have listed all the info, you add it with your monthly bills to get a clear picture of your full monthly spending habits. This is also handy for when you have to do your tax as you won’t have to go through every single receipt you kept for a year to claim any work related expenses.

Before developing a budget, analyze your spending to seek ways to reduce your expenses and have extra money for savings and paying off emergency expenses.

Create a checklist and compare it with your monthly income. For monthly bills or expenses, check this amount off from your income so you know not to include it. Vacations, entertainment and emergency savings accounts should all get something to ensure you have funds when you need them. Any extra that you have should go to the savings account or applied to pay your credit account balance.

Also it’s good practice to create expense items for your weekly entertainment, food and gas. Set one-time bills monthly and account for them in your budget. Provide yourself an amount for going to the movies each week for example but try to limit your spending to ensure you have money for other bills and expenses.

Get A Part-time Job

Sometimes tightening your budget belt may not be a practical solution to make ends meet. If you find yourself unable to sustain your budget each month, then you can take on a part-time job to pay your bills and get your finances under control.

Budgeting money is difficult especially if you know at the start that your expenses are higher than what you are earning. Be practical with your finances and objectively look at your situation and make hard decisions. If you see yourself in a negative financial situation, have the initiative to get yourself out of that hole by seeking ways to earn more money. If you can spend more money, then it’s practical to find ways to earn more.

Even if you have a good budget and no monetary issues, if you have the time, then take the opportunity to get part-time job for extra income. The money you make can be put into your various savings account to strengthen your financial situation in the future. Anticipating what the future holds is difficult but it is always a good decision to take prudent preparations when you are able-bodied. Putting more money to your savings accounts even if you do not need it will create more available funds when an emergency arises. Seek is a good place to start.

Card Freebies

loyalty program hacks

An individual with good spending habits can benefit from the use of credit cards through practical financial planning. There are several benefits that one can take advantage of. When applying for a credit card, look for an issuer that understands your situation. If you like traveling, get a card that provides discounts in travel, hotels and rental cars. Search for the card with cash-back features to help you have extra money into your pocket within the year.

If you can afford to have a credit card (i.e. pay it off within interest free period) and want to use it to increase your frequent flyer points then take a look at Point Hacks. They have some sensational guides on how to choose the right loyalty programs and cards to reach your travel goals.

Credit cards are necessary when renting a car and doing other activities while traveling or vacationing. It’s good practice to have the ready cash to pay the credit card bill when you get it within 30 days. If you can rack up cash-back payments for spending cash that you have on hand, then it’s a good financial move. If you can pay the balance within a month, then you lower your interest debt to almost nothing. Use your credit cards responsibly to get ultimate benefits from them.

Save More & Spend Less

Many retailers seek people to make huge purchases by enticing consumers with low monthly payments – A large temptation when trying staying debt free. If you can easily make a monthly payment on a financed item, then you should be able to save the money to buy that item in cash. Want that new Playstation? Be patient and buy it in cash!

Saving money for purchases is better than opening a finance account for the practical buyer. Wait for a few months to buy the item. If the purchase is not a critical need, then saving for it will give you the things you want without putting yourself in debt. Plus it gives you the time to think about the purchase to see if you really want it.

Do-It-Yourself Tasks

Learn to do the tasks that you would normally pay a professional to do like changing your own car oil and taking the old oil to a local auto mechanic for disposal. If you have knowledge in home renovation, research innovative ways to do projects on your own rather than shelling out extra cash for hiring a contractor. If you have the opportunity to save money by doing something for yourself, take that challenge. If you can wash your vehicle every week with your own water and supplies, do it to avoid paying for a car wash. Finding practical ways to save money draws you away from getting into deeper debt.

Some of these points may sound like common sense to you and if that is the case then great! You’re well on the way to being financially free from debt. If you’re on the other side and some of these points seem dark and mysterious, try implmenting one or two changes at a time slowly so you can get used to the new behaviour. This will make it easier for you to stick to your new budget and believe me, your wallet will thank you!

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