Hey, what do you do to ensure you stay out of debt? These days so many people seem to be in debt and most of them have no idea how to get themselves out of it. While there are institutions that can help you get out of debt, I think the best way to deal with debt is to avoid getting into it in the first place.
But understandably, sometimes that’s not always possible. For most people, one serious hospital bill could just be that stepping stone to debt. Then there are others who literally and deliberately put themselves in debt. It sounds unbelievable but it’s true. For some people having multiple credit cards is a good way to get themselves into debt.
According to the Federal Reserve, as at 2017, total credit card debt has surpassed $1 trillion and the average American has a credit card balance of $6,375. Another report suggests that on average, U.S. consumers own three (3) credit cards and the total revolving debt stands at $1.04 trillion.
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Credit Card Use
Admittedly, having a credit card is convenient. You can use it for emergencies and other contingencies. But if you don’t understand how a credit card works or the best way to use it, then you are certainly putting yourself at risk for debt, that’s for sure.
That shiny new credit card that was just delivered, seems to beckon you to use it doesn’t it? Oh the fun you can have, and all the things you can get yourself. But the fun is soon over when the bill arrives that’s for sure! So it’s really important to know how to use a credit card properly, so that you don’t end up incurring more debt than you can afford. Keep in mind that you’ve got to repay that money you are using.
What do you do to ensure you stay out of debt?
Granted we all can’t buy everything with cash and at some point you might need a loan. Then there’s the mortgage payments and let’s not forget student debt. Damn, how is a person to survive all of that? One day at time, that’s for sure.
As far as your credit card goes, you should endeavor to pay off your balance in full each month. Suze Orman actually endorses that practice. According to Orman, “Your goal should be to pay off your credit card bills in full at the end of each month and set aside money toward your emergency savings.
Coming soon: A simple savings plan that can help you save over $4,000
That’s something that I have always practiced, since I have had my credit card. I always pay my balances in full, regardless of the amount. I do that because I know that paying those minimum balances will only add interest to the outstanding amounts and make what I owe even larger. Paying minimum balances is a great way for you to help credit card companies make more money. Yikes!
Why are some people in debt?
Well excluding home mortgages, the average American owes about $38.000! It is suggested that millennials are in a much deeper financial hole than other generations. The reason for that just might surprise you.
According to CNBC, 1 in 4 millennials carry credit card debt and they are struggling to pay it. The article further states that “The average American aged 25 to 36 years old is in debt to the tune of about $42,000,” and most of it is not from student loans — it’s from credit card spending.
But the crazy thing about this is that everyday expenses contribute most to these millennials credit card debt. According to Shark Tank’s Kevin O’Leary, the top three stupid things that millennials waste money on are $4 coffee, shoes and jeans.
“Four in 10 millennial say day-to-day expenses such as groceries, child care and utilities are their biggest reason for carrying a credit card balance.” About 20 percent cite emergency situations like medical bills and car repairs and two-thirds of them are stressed about it.”
But what’s equally shocking is that “60 percent of millennial don’t have enough money to cover a $1,000 emergency.”
Getting yourself out of debt
So what do you do to ensure you stay out of debt? Do you have an emergency saving fund? How do you take control of your finances?
Most experts recommend that you set aside at least three to six months of living expenses in an account earmarked for emergencies. Easier said that done right, especially when you are living paycheck to paycheck. But having that savings, can be a buffer between you and high-cost credit card debt.
Understandably, carrying a lot of debt can make saving challenging. The key is to start small and work your way up until you have the recommended six months of savings.
You can also make use of your small change as well. Using an App like Acorn, can help you save. You may also want to look into getting advice from various financial institutions like Freedom Debt Relief for example.
Start a side hustle that can help you make some extra money to help you get out of debt. There are so many opportunities you can use to do that, it’s amazing! For example, if you like freelance writing you can do that. If photography is your thing, you can sell you can make money selling your pictures online.
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