Thursday, 1 October 2009

Tips on How to Avoid Debt

Debt is certainly avoidable if only we restrain our spending habits. After all, debt doesn’t happen overnight. It is our spending habits that lead to debt. If only we could recognize those habits, we could save a lot of money and also save ourselves from the clutch of debt.

Here are some very common yet mostly ignored points about our spending habits discussed below.

It might sound weird, but most of us have a habit of spending more money than we earn. You might be wondering how is this possible, but if you analyze, you will find this fact is true. There are ways like borrowing from others, dipping into savings, and using credit which help us spending more money than we bring in. As you spend money using credit cards and taking out loans, soon your credit cards will be maxed out, and you can't borrow any more money.

Many of us have the bad habit of using credit cards even for ordinary purchases. The appeal of credit cards is the ability to pay later for items that you buy now. But using credit instead of cash is a bad habit, more so when you don't pay your credit card bills in full each month. Hence for your everyday purchases like groceries, gas, clothes, and entertainment, you should use cash instead of credit cards.

When you use one credit card to pay off your other cards and loan payments, you're not paying off anything actually. It’s like using debt to pay off debt because when you use debt to pay off debt, you end up in heavier debt than you were in the beginning.

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