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Don’t Get Into Debt – Stay Out Of It

With the year now well and truly underway, many people are looking at ways to improve their financial situation. One of the things that they are doing is trying to stay out of debt. After all, being in debt is never any fun – except for that brief moment when you spend the money.

Getting into debt can be problematic. Interest on the money you owe can go up quickly. Soon it can overtake your total disposable income – at which point, you’re in big trouble. So how can you stay out of debt?

Build An Emergency Fund

In life, emergencies happen all the time. You never really know when the boiler is going to break or when your car will stop working, so having a little money left aside for events like this help keep you from going into the red.

Most experts recommend that people have at least $1,000 tucked away, just in case of some unexpected expense. The most common expense is for work on the car, but you could also find yourself paying out for health care costs.

Never Co-Sign A Loan

You might know somebody who has been refused a loan on their home or on their rental agreement. These people will often canvas their friends and ask if anybody would be willing to co-sign their loan agreement, guaranteeing the lender that they’ll get paid back.

The problem with co-signing a loan is that it is a risky business. The reason that lenders want somebody to co-sign a loan is that the person they are lending to is unlikely to pay back the loan. They want to have legal recourse should payments stop so that they can get their money back. Co-signing, therefore, shouldn’t be seen as a favor. Banks aren’t just being mean when they ask for people to cosign a loan. Instead, it should be regarded as a significant risk, especially given the type of individuals who need to have their credit agreements co-signed.

As a general rule of thumb, stay away from cosigning. There’s nothing in it for you, and you could wind up getting saddled with a massive bill.

Don’t Ignore Your Debts

Despite the fact that the news about debt relief is generally good, people still ignore their debts. They convince themselves that they are so high that there’s nothing that they can do about them. Over time, their debts mount, and the mountain of debt gets larger and larger. Sometimes the payments on the loans get so big that people take out more debt, just to pay them off. This leads to a downward cycle that’s tough to break.

The solution, of course, is to nip it in the bud before things get out of control. Debt consolidation is a good option for people who are finding multiple debts difficult to manage.

The bottom line is that staying out of debt is a lot easier than digging your way out of it. That’s why it’s such a good idea to carefully plan your finances, making sure that you can meet all your obligations.