Staying out of debt or getting out of debt are goals that will set you up for future financial success. It’s also easier said than done unless you have a plan. One of the most effective ways to stay out of debt is to use a budget and stick to it. Use these tips to start your budget today.
#1 Plan Ahead
If you’re busy paying for things you’ve done in the past, you’re struggling to keep up. When it comes to debts like student loans, the more aggressively you can pay them back, the sooner you can start thinking about future expenses. The key to staying out of debt in the future is putting money forward to pay for future expenses. Emergency home repairs, car repairs, or job loss are easy ways to get into debt, but you can prepare for them.
#2 Use Your Credit Cards, but Carefully
In order to build your credit history, you need to use your available credit, typically credit cards. The better your credit history, the cheaper it will be to borrow money in the future, as banks base their interest rates on their perceived risk, something they use your credit score to evaluate. Credit cards that offer you rewards or free money can also add to your monthly budget but don’t use that as a reason to abuse your credit card spending.
#3 Meet 30 Day Payments
Using your credit cards to build credit only works if you pay your bill off in 30 days. Prompt, full payments are rewarded with a better credit score. If you can’t afford to pay off a purchase in 30 days, don’t buy it.
#4 Get a High-Interest Savings Account
Some budgeters will tell you to use financial windfalls to pay bills in advance, and while it can help you free up money in the future, you’re better off setting extra money aside in a high-interest savings account. Instead of splurging extra income, set it aside so that it will grow further. Eventually, consider investing for higher interest rates.
#5 Cut Back Your Expenses
You may be wondering where all this extra money is coming from. If you struggle to find wiggle room in your monthly budget, you may need to cut back on unnecessary expenses, whether that’s ordering takeout, spending too much on Uber or cabs, or paying for cable.
Even the best-made plans and the best-made budgets can’t keep you out of debt. Job loss, divorce, illness, and many other unpredictable factors can lead to high debt levels that you can’t afford to repay. If you’re facing more debt than you can pay, it’s time to talk to a bankruptcy trustee, now known as a Licensed Insolvency Trustee. Bankruptcy trustees like David Sklar & Associates in Canada can help you file for a consumer proposal. A consumer proposal in Canada is a way to repay your debt without having to sell any of your assets. If you’re interested in consumer proposals in Canada, contact a bankruptcy trustee. Debt doesn’t have to control your life. Once you’re back on your feet, follow these tips to stay out of debt in the future.