5 Effective Ways to Stay Debt Free

A debt is an amount of money owed. It arises when we borrow money or spend more money than we have. Debt creates stress, which can in turn lead to health, psychological and emotional disorders. Debt can feel like a heavy load on you and can drain your energy. You should learn how to manage your available finances in order to stay debt free.

In case you are already in debt you should make arrangements to pay off your current debt and avoid occurrence of more debt. Getting rid of debt gets rid of stress and underlying problems. Getting out of debt and staying out of debt is not easy. It requires you to apply certain principles in managing your finances and to practice financial discipline as well. To achieve this, here are 5 effective ways to help you manage your finances and stay debt free

1. Make a Budget

A budget is a plan of how you will spend available money. Make a list of necessary expenses and cut back on those that you don’t need. A budget tells you where your money is going. Stick to your budget as you make your expenditures and avoid impulse buying. A budget will prevent you from spending more than you can afford hence minimizing the possibility of falling into debt.

Discipline and accountability are crucial virtues that will help you achieve positive results with a budget. Review and amend your budget regularly to accommodate changes in your life. Never fall behind on monthly bills. Falling behind on bills will slowly lead to accumulation of debt.

2. Avoid Using Credit Cards

Credit cards are tempting and can plunge you into a cycle of debt. Change your spending habits and cultivate a habit of using cash or a debit card as much as possible to stay debt free. However, if a credit card is necessary apply for one with a low interest rate. A friendly interest rate will allow you to pay your debt easily.

Where possible only use credit cards to finance income generating assets. Using credit cards for consumables is not a wise idea. If possible, always pay more than the minimum amount due on a credit card. This will enable you to pay off your debt within a shorter period.

Always keep a record of all your credit card expenditure. This will help you monitor your debt and raise an alarm when you are going overboard.

3. Build An Emergency Fund

Emergencies are sudden unexpected needs. They happen when least expected. It could be a medical bill or otherwise. It is important to create a fund whereby you deposit a certain amount of money every month for emergencies. If you haven’t made plans for emergencies, they can plunge you into serious financial crisis and eventually debt.

4. Save and Invest

Save as much as you can and try not to spend more than you earn. Take advantage of discounts and offers in the market to enable you save money. Learn to negotiate for discounts and make a habit of comparing prices among stores in order to enjoy the best price available in the market. This will in turn help you save money which can be invested in profitable ventures.

Investing helps cultivate positive spending habits which translate to wealth in the foreseeable future. You can also contract the services of a good financial advisor. He will guide you on investment portfolios and enlighten you on less risky investment ventures.

5. Earn More to Stay Debt Free

If you frequently find that your expenses are more than your income, you need to come up with new ways of creating more income. You can do this by either getting a second job if you are employed or creating a business to run alongside your job. This will enable you to meet your financial obligations and stay debt free.

You can also dispose slightly used household items that you don’t require to make extra money. Items like clothes, electronics, furniture, kid toys. It adds no value to you cluttering your house with things that you don’t need whereas they could generate some money which can be saved or used.