No one wants to be in serious debt, but it seems like everyone owes someone. Whether that’s for their car, their house, their credit card bills, or their medical expenses, there are millions of people in debt. And, while debt isn’t inherently a bad thing, if you have too much, you can feel like you’re drowning.
Today, we’re looking at some of the top ways you can avoid getting into serious debt in the first place. Aspiring to live debt-free is a noble goal, and will open your finances up considerably. Here are the best ways to avoid major debts and how you can hang on to more of your hard-earned cash.
If you’re not making six figures, don’t try to live in some massive upscale house. That shiny new sports car might be technically available thanks to your credit score, but it would eat up half your paycheck. That new smartphone looks amazing, but it costs thousands of dollars. In general, remember: there are cheaper alternatives to these nice luxuries.
Living above your means is a surefire way to bury yourself in debt. Buying a huge house, a nice car and a flashy smartphone on credit can get you behind from the start. And when those nice things need repairs or get damaged? You’ll be too short on cash to cover the repairs. While you struggle to keep up with the minimum payments, the interest just keeps piling up, and you get stuck.
When you’re dying to get a new car, remember, it’s better to save than to borrow. Instead of signing up for a car payment that is going to build interest and needs to be paid every month, start saving. Take what you can afford to save back for a new car fund every month and put that aside. When the time comes, and you’ve got the money for the car ready, you can just buy a new car in full.
This could apply to anything you borrow money for. By saving money, instead of borrowing, you save yourself a ton of money and keep your assets fluid. In case of an emergency, before you buy the big-ticket item, you’ve got considerable savings to put back. You can use that for unforeseen expenses in a pinch, unlike with a car payment.
Buying the car straight out will save you a ton of money. Not only will dealerships be able to cut you a deal, since you’re paying in full, you’ll also avoid interest rates. You won’t have to worry about interest building over several years as you pay the car off. You’ll just own it, full-stop.