Anyone can get into debt if they aren’t careful. Some debts come from poor choices, like high-interest card debt, but even the most responsible of people can go into debt because of unexpected expenses like emergency medical bills. This article looks at five of the fastest ways to get into debt, and how to avoid them.
Credit cards make it easy to spend money that you don’t have. Impulse purchases add up and if you can’t afford to pay your card off in full, interest will cause your debt to grow quickly. The best way to avoid credit card debt, aside from using cash, is to track your expenses and follow a monthly budget. Don’t spend more than you can afford to pay off, and always pay your bill on time.
Financing a new car is an unnecessary source of debt for many people. Because new cars depreciate rapidly, you will probably owe more than the car is worth for the first few years that you own it. To avoid these problems, save up before buying a new car and pay in cash. If you have to finance a car, get a loan from your bank and buy a reliable used car.
Homes are the most expensive item most people will ever buy, and most of us will have to go into debt to own one. Before you buy a home, think about your future plans. If you will be moving within five years, you probably won’t be able to sell your home for more than you owe. Save a down payment of at least 10-20% before you buy, and avoid interest only mortgages that increase your monthly payments over time.
Students are often encouraged to take out tens of thousands of dollars in student loans in the hope that a degree will pay for itself. Unfortunately, high unemployment rates mean that it is very difficult to find high paying work right out of college. Save money by attending a public university and applying for scholarships and financial aid.
An unexpected accident can result in major medical bills. Avoid going into debt by buying health insurance with good coverage and a deductible that you can afford. If you qualify, open a health savings account (HSA) to save up for medical bills before they’re due. Money deposited into an HSA is not taxed.
Debt is a tool that should be used carefully. Always have a plan for paying off your debts. Don’t take on more debt that you can manage. The keys to secure debt free future are planning, patience, and prudence.
Melissa Tamura is a freelance blogger who normally ranks prepaid phones for PrepaidCellphones.net. Her latest review covered the Tracphone