Heading in to 2012, millions of people will strive to keep their New Year’s resolutions. Many have set goals to lose weight, others to achieve a career goal, yet probably the most important resolution that we can make, is to get out of debt and stay there.
In most cases, staying out of debt is simply a matter of budgeting and self-discipline. The best rule to live by to avoid getting into debt in the first place is this: If you can’t afford it, don’t buy it!
These are great words to live by, but not always easy to apply in everyday life. Retailers encourage us to shop, offering easy, in-house financing to purchase large ticket items that we really can’t afford. They seduce us with low monthly payments, but neglect to mention the finance charges, which considerably increase the amount we actually repay. This is where self-discipline comes in: resist the slick sales pitch.
The following 5 tips will help you to avoid falling into the debt trap, and keep you on track for 2012:
1. Live Within Your Means
For some people, this is the Mt. Everest of personal finances. It can be difficult, especially if you have never applied self-discipline to your spending habits. If you are serious about staying out of debt, the key is to spend less than you make. This may mean cutting out that daily mocha cappuccino, the impulse purchases when shopping, or cooking instead of dining out. Review your spending habits to see where your money is going, and to determine areas where you can save.
2. Will That Be Cash Or Credit?
Credit card companies make it easy to overspend. After all, you can charge it now and make monthly payments, right? Not so fast! Before slapping that plastic on the counter, consider the total cost of an item, including interest charges, in case you end up carrying a balance. By paying cash, you will avoid the temptation to overspend.
3. Pay Balances In Full
Many credit cards offer great reward programs where you can earn air miles, cash back, store credits and many other perks. The trick to taking advantage of these programs, is to charge only what you can pay off each month. This way, the credit card company is paying you to shop. Enjoy the rewards!
4. Lock Up Your Credit Cards
If you are one of the millions of people who has a hard time resisting impulse buys if you have plastic in your wallet, then by all means, take it out! Lock your cards away and resist the urge to take them with you when you leave the house. If you don’t have them handy, you can’t use them, right?
5. Create A Budget You Can Live With
To stay debt free, you need create a budget you can live with – and stick to it! Working within your income, be sure to include all regular expenses, designate a set amount to put in savings each month, and leave a little to spend.
Apply the principles we have outlined here, add a liberal dose of common sense, and you can stay out of debt in 2012!
About the Author
This article was written by Phill representing CompareLogbookLoans.co.uk – an independent financial website bringing together and comparing available log book loans.