Almost everyone with an average income has one thing in common - debt. It is everywhere; it corners you in every way possible. The last thing you want to do is add it up mistakenly. How can you add it up by mistake? Simple, increase your line of credit now, rack it up later. That is what tends to happen when someone accepts an increase. All major banks are good at one thing: calling you to offer a credit limit increase. They want you to feel “comfortable” knowing that in the event of an emergency, you have that credit sitting there waiting for you. Unfortunately, this is not how it usually goes. The amount of people that have racked up credit cards - and have it racked up with non-emergency items (furniture) - is astounding. If you are not personally in this situation then someone close to you definitely is.
The best way to stay away from debt is to pay for everything in cash and don't apply for credit cards. Since this is nearly impossible for the average moneymaker, let's explore some ways to stay away from it as much as possible.
Keep your credit card limit as low as possible.
$500 - $1000 is more than enough to have for emergency “peace of mind”. Anything higher than that will give you temptation to use the overly convenient line of loan money. Even with a low-interest rate, a credit card that is maxed-out can be a heavy, head-spinning burden.
Save, don't borrow!
Let's put borrowing money into perspective here: You open an account with a bank. Then you willingly give that bank your money, which they freely invest into whatever they want. They pay you tiny interest rates while they make huge returns off of your money. Then, you take out a loan from that same bank and pay interest rates that usually double the interest you are gaining on the money you gave them! Banks make billions of dollars profit a year off of money that comes from hardworking low-mid income “customers”.
Save your money for what you are looking to purchase, then buy. Do not borrow money for something that you do not necessarily need now! Save now, buy later -or - borrow now and pay way more over the long run. It is definitely easier said than done, but if you plan your expenditures - it can be done.
The easiest way to stay away from debt is to stay away from reasons that require you to obtain it. Do not impulse buy with your credit card - this is the biggest hole you can fall in! It is too easy to leave yourself circumambient with payments… leaving you with nothing at the end of the month to put into savings. Think before you buy should be common knowledge, however sometimes that “want” purchase can be too tempting. Fight temptations with realizations of your financial goals.
Do not get yourself stuck fighting off your debt from your own overspending habits! If you find yourself wanting to use your credit to buy something that is not necessity, remember this: Purchasing it on your credit card will automatically make the item more expensive (through interest on your credit card). We all say we will pay it off right away, but how often does that actually happen? THINK before you BUY, and don't have too much credit waiting for you to trap yourself with.