a) Don't Spend More Than You Make
We know, it’s easier said than done. With all loan and credit options it’s easy to spend more than we have, because we don’t realize the amount of money we can manage.
Organize your budget: Planning is the best way to avoid debt. Designate a portion of your income for every category of expenses and commit to spend only that amount of money. You can use online applications to estimate your debt and organize your budget.
Pay with cash: If planning and commitment aren’t your strengths, carry cash with you and use only that amount. Forget about credit cards, only use them for an emergency.
Pay attention to where your money is going: Sometimes you get into debt because you don’t realize where most of your money is going. Keep track of your expenses. At the end of the day you can write them down in a notebook or you can download a mobile app where you can keep a log of every time you buy something. At the end of the week or every 15 days sum up all your expenses and organize them by category. This way, you will notice if you are spending more money than you have, plus, you’ll realize where your money is going. Maybe that $4 daily coffee is more money that you thought.
b) Purchase Only What You Need When You're Having Economic Problems.
Frequently, the reason people get into debt is because they don’t know how to manage their expenses when they’re having an economic problem. When their partner gets laid off or sick, for instance. In this case, you need to purchase only what you need, because you don’t know for how long you’ll be in this situation. Credit can only help you for so long, the day will come when you must pay.
Learn to say NO to yourself: we know the temptation of buying that big HD TV, or that new car, or maybe you had planned to go on vacations. But, if you know that your economic situation doesn’t let you have those things, just say no. However, don’t worry. This is a no, not a never. The better way to buy those kinds of things is saving cash and paying up front. At the end, you’ll feel much better having something new that you don’t have to pay later.
Stay with something that fits your situation: if you’re into debt or facing an economic problem, maybe you’ll need to keep that small house, buy a used car, or stop frequenting those fancy restaurants. Still, don’t forget that if you learn how to manage your money, you can keep having those things you love once in a while.
c) Learn about your credit institution
Nowadays, it’s easier to obtain a credit. All offers promised by credit institutions sound great, yet, this is one of the reasons why we get into debt, because we don’t read all the agreements or we don’t calculate how much we’ll be paying at the end.
Read the small letters and fine prints: When you get a credit, you need to sign documents, agreements or contracts. We know it may be tedious, but always read the fine print on all agreements made with any financial institution. A lot of times there are hidden costs. If there’s something you don’t understand, ask. Try to do some research in advance of all the fees or cost the credit might have. For example, credit cards might have late payment fees, over-the-limit fees, cash advance fees, etc..
Work and negotiate with your credit institutions: Talk to them about your situation, ask for the benefits you could have if you pay more than the minimum or in advance, such as, lowering your APR, for example. If your financial institution is not willing to help you, you can transfer your balance to another credit company. Also, always keep in mind your consumer rights.
Learn about credit: In order to learn about how credit works, it can help us a lot to not get into debt, read a few articles on the web, ask a friend that may have some information about this subject or attend small workshops that government or financial institutions offer. There’s also credit calculators and comparisons between companies on the internet that can help you choose the best financial option for you.
What tips will you start practicing today?