A new year is a new start to achieve your goals and steer your life in the direction you want it to go in. For the millions of people in the U.S. who owe money on loans, credit cards, medical expenses, or other lines of credit, a great goal to consider is avoiding getting into further debt.
With Liberty Debt Relief’s five tips to stay out of debt this year, you can join those who are working on bettering their financial situation, and life as a whole, throughout the upcoming year
1. Only Make Credit Card Purchases Based on Income
When looking at how to stay out of debt, only make purchases on your credit card that you can afford right at the moment. Consider your credit card a mirror of your bank account — if there is not enough money in your checking account to spend on the item you are looking at, then force yourself to think that there is not enough on your credit card as well. This will encourage you to limit your purchases to what you can clearly afford instead of what you wish you could.
It is also a good idea to set a credit card limit for yourself every month. Unless your income actually allows you to pay hundreds of dollars every month to a single line of credit, it is unlikely you can afford to continuously max out your card. A limit will help you avoid going over so you can pay off your balance every month and improve your credit.
2. Set a Budget for Non-Essential Spending
Avoiding debt is an extremely difficult thing to do, especially if you are known to enjoy the occasional shopping trip, night out, or regular vacations to travel the world. Even though all of those sound like great investments for your personal life, they can wreak havoc on your financial life if you are not careful. While you definitely do not have to cut out all of those pursuits completely, it is a good idea to limit your non-essential spending every month.
After writing down your essential expenses — utility bills, car payments, insurance, groceries, gas, etc. — plan a couple of ways every month you can treat yourself that do not go over your remaining money. Maybe plan to spend only $50 on new clothing, $100 on a new piece of technology, or even save up a little each month so you can take one grand vacation at the end of the year. This way, you will not go off track with your purchases and you can enjoy the things you love without paying a heavy price in the future.
3. Invest in Savings
To know how to stay out of debt, you have to know the reason you got into debt in the first place. Many people fall into a dire and complicated financial situation because they overexerted their funds and had no cushion to fall back on. By considering savings a part of your essential expenses list, however, you can create a backup fund so that any unforeseen expense, such as a sudden medical bill or emergency situation, does not put your financial health over the edge.
There are even savings accounts that actually earn you money via interest. Plus, having a healthy savings account actually motivates people to take better control of their spending.
4. Maintain Your Comfort Instead of Increasing It
For many people, a new year also brings about more opportunities in their career. Some are offered a raise, promotion, or maybe a new career move altogether that brings about a significantly higher income. The key to avoiding debt in this situation is to continue living at a level of maintenance rather than one of sudden luxury. The worst move you can make after suddenly getting a boost in income is to make extravagant purchases, move into a larger apartment or home, or start neglecting your budget.
If you are still recovering from past debts, always make it a goal to pay that debt off first before taking on any new ones. As exciting as having additional money is, it is also important to focus on putting that cash towards the most important financial obligations. Maybe get ahead on some bills, put extra money into savings, or even invest in stocks. That is not to say you cannot celebrate the accomplishment and allow yourself a little more fun every month, but make sure to stay on budget and keep your end goals in mind.
5. Focus on the Future
To stay on track and really work toward understanding how to get out of debt and stay out of it, it is important to always keep the future in mind. Sure, there are some really incredible trips, gadgets, or other purchases that could make you happy for the moment, but they also can put you at risk of going back into even heavier debts than anticipated and preventing you from enjoying those same things at a later date.
Having to worry about your finances does not have to be a permanent way of life, but you cannot move past that point and get into a situation where you can live out your dreams if you are living well above your means before it is time.
Take Control and Make This Your Year to Thrive
This is a new year to take control of your situations and push yourself toward your dreams. Do not fall victim to getting swept up in the moment and let your finances do what they please. Contact Liberty Debt Relief today and an experienced debt consultant can help you hone in on these tips and plan the ultimate year for your financial success.
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