In today’s economy, everyone has dealt with debts at some point or another. From individuals to corporations and from municipal committees to federal governments, loans are helping people and institutions to cover a large or small portion of their expenses. Some people fall into the debt trap out of reckless spending or financial emergencies. In such a scenario, debt settlement seems to be the only way out.
Though debt settlement may seem to be an easy solution, the real struggle is in staying out of the debt trap. As an individual, what are some of the healthy financial practices that can help you avoid falling into a messy financial situation? Let’s discuss some of the ways to do that.
We often look at others’ lifestyles and indulge in expenses which are not necessities but luxuries for us. The week-long vacations, the endless online shopping, and the habit of ordering food from restaurants most days of the week are just some of the unnecessary expenses we pile on. The day would not be far when you would need something you just cannot say no to. You may use your credit cards to pay for those indulgences, and soon enough, you will be back where you started.
Savings before expenses
If you earn $100 a month, and you spend first on all your expenses to the extent of $60 with a plan to save the remaining $40, the plan will work fine for the first few months. However, there will come many months when the expenses will shoot up to $90, and you will be able to save only $10. The better way to do this is set up automatic debits on your bank account to pull the $40 into your savings the same day (or maybe the next day) your salary hits the account. Once that is done, you will be left with only $60 in your account to spend and will not be able to increase your expenses beyond that.
Avoid credit cards
When you log on to the internet and readdebt settlement reviews, you will realize that the most significant source of loan defaults are credit cards. These make us spend on things we do not need and which we cannot afford. The above example about keeping savings before expenses would work if you had no credit cards. If you had credit cards, then you would simply use it to spend the additional $30, and end up with a $30 credit card bill the next month. The only way to avoid credit card debt is to avoid credit cards altogether because if you have a card, you will find ways to use it.
Add to savings portfolio
Apart from having a fixed monthly goal of savings which should be non-negotiable, you should also keep adding to your savings in those months when you can. When you get a little extra cash in hand, your natural tendency would be to splurge it on something. However, you need to remember that you will also have months when unplanned yet unavoidable expenses will come up, and in those months, you will miss your savings targets. To offset those months, you need to save more than your plan in the better months.
These four ways of self-discipline, if followed rigorously, will help avoid the need to take loans, and also allow you to dip into your savings when needed. Maintaining these rules will help you find your financial stability after you have gone for debt settlement.