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Never Get In Debt Again

If you’ve been in debt before, then you know it’s far from a pleasant experience. If you haven’t, then count yourself lucky. It’s more than financially tough. Money stress is a very real thing and can lead you down a spiral that can take years to climb out of. Years that could be spent saving and building your way to financial freedom. Debt is a roadblock that can steal big chunks of your life. But it’s a roadblock you can drive around if you know the right roads to take.

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Audit your finances

If you’re taking a serious look at your current financial situation, then that is the place to start. It all starts by taking some time, a month or two, to see what your bank statement says about where your money goes. For one, use those bank statements to address all your memberships and subscriptions. If there are any you’re not using or not getting your money’s worth out of, now is the time to cancel them. Once you’ve done that, you should have a good idea of how much money you have coming in and where it’s going out. From there, build a budget. Set yourself different categories for essential expenses like rent, insurance, and groceries. Set another for personal spending. Then have a financial development portion set aside. This money has a purpose we’ll get into a little later.

Control your spending

We can’t be in denial. If it’s our own spending that has us flirting with debt so often, we have to take responsibility. For instance, you should be a lot more aware of when you borrow. If you’re using your credit card regularly for purchases when you don’t currently have the money in the bank account, you’re being reckless. If you need to borrow for an expense that isn’t an investment, don’t do it. As for your regular shopping, you can save a lot of money by simply having a shopping list, as Bankrate says. When shopping is unfocused, we tend to go more by impulse, picking up what we like the look of rather than addressing our needs.

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Get protection

That’s not to say that everyone who finds themselves in debt is there because they play fast and loose with their money. In fact, most cases of serious debt come about because of an external problem. There are some unexpected ways to find yourself in hot water, from the sudden loss of employment to an accident that ends up costing you a bomb in legal fees. You should look at investing in things like income protection insurance, for one. But you should also have a general-purpose emergency fund as one of your savings goals. This can cover every accident that your insurance won’t cover so you always have some insulation between your finances and the big bad world.

Keep credit healthy

That’s not to say you shouldn’t borrow or have a credit card. For one, make sure you’re using reviews like those from CreditRepairCompanies to see which credit cards offer you the deal you can capitalize on. Not just in terms of interest rates, but the rewards that could see you making better gains from regular credit card use. Credit card use should be regular, too, but it should always be used to the extent that you can already pay them off if needs be. They’re not a source of free money, but a different way to use money you already have. Money that is going to keep credit healthy so that, when you need to borrow to get out of potential debt, you have many more options.

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Shop around for loans

As with credit cards, you should spend more time looking at your different options before you take out a big important loan. Educate yourself on your loan options. Figure out a strategy for repaying them before you take them out. How long will it take you? How much are you going to be paying with the interest added on top? Does it require collateral? These are the questions to which you should have answers long before your pen finds itself anywhere near the dotted line. This also means revisiting the budget and finding the space for paying the loan every month.

Get used to calling your creditors

There’s one mistake a lot of people make when it’s starting to look like they’ll fall into debt. They will stay silent about it. They won’t go to their creditors but wait for them to come knocking. When they have to do that, you’re in trouble. You can avoid a lot of trouble by taking the first step and initiating the conversation. If you let them know good and early that you might not be able to stick to the terms of the agreement, they have a lot more wiggle room to offer you a better deal. They can change the length of time you have to pay or they can freeze interest. You might even be able to settle it with a one-term cash payment. But if you wait, then your creditors are going to go to collections agencies. When they get involved, your options will shrink right down.

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Don’t forget anything

It’s an easy way to fall into debt. It’s as simple as not paying a bill here and there. The costs will keep adding up and your credit will keep suffering, making it harder to find solutions when you need them. Stop that from happening. You can automate payments, but some say that this promotes an ‘out of sight, out of mind’ approach that can dangerous in its own respects. Instead, keep an organized approach to your financial obligations in sight at all times. Get a whiteboard on your wall and create a map of your finances, as shown at Mindmeister. Then make sure you mark all dates for payment and any other financial considerations on a virtual calendar to remind you each month.

You can’t entirely futureproof your finances, of course. Some people just have very bad luck. But the tips named above are just as good for getting out of debt as they are for avoiding it, so keep them in mind.