One of the best feelings in the world is knowing that your debt-free. It’s not easy, especially in a world where you need money to buy the things you need. But it is possible, as long as you’re ready to make certain changes in your lifestyle.
To help you start, here are seven smart ways you can do to avoid falling into the debt trap:
#1 – Stick to your budget.
Without planning a budget, it’s difficult to tell how much money you need to sustain your daily needs, or how to allocate an unexpected inflow of cash. As a result, you will end up borrowing money from your friends, co-workers, or relatives. Sometimes, even relying on credit cards or other debt to fill your needs.
#2 – Avoid gambling.
Gambling might be a bit fun, but it is a wager which can involve significant loss of money if not controlled. Remember that one sure way of falling into debt is betting a large portion of money on an event with an uncertain outcome with the hopes of taking home a bigger return in no time.
#3 – Avoid deficit spending.
A deficit happens when one spends more than the money he earns at any given time. An accumulated deficit then becomes a debt or liability to pay. To avoid deficit spending, make sure to spend below your means. Don’t go for a lavish lifestyle if your income can’t afford it.
#4 – Avoid bad investments.
Never put your money into something that you don’t completely understand, especially opportunity that sounds too good to be true. Most Filipinos love the idea of easy money, that’s why there’s a lot of scammers. Protect your money at all cost, and if possible, talk to a professional before investing a large amount of money.
#5 – Build your emergency fund.
An emergency fund can help you survive any unexpected storm in your life. Having a sufficient amount of money to pivot when something happens will help you avoid borrowing money or owing a debt to anyone.
#6 – Get insured with living benefits.
Life is filled with uncertainties. So what better way to feel more secure by having your life insured. There are life insurance policies that also have living benefits that can help you with face uncertainties like accidents, terminal illness, or disability. There are also policy plans with cash values that you can use for other emergencies.
#7 – Have a financial plan.
No matter how much you earn, if you don’t know how to handle your money, then you’ll always be out of it. This is why it’s important to create a financial plan, especially when making big decisions in your life like marriage, buying a house, or building your retirement. Like they say, it’s better to be ready than not.