December 23rd, 2013
**Today’s guest post is contributed by Lauren.**
Debt is an ugly four-letter word that gets thrown around all too often. With 68% of Americans in at least some type of debt (credit cards, student loans, medical debt, auto loans, etc.), it can often seem like avoiding any debt at all is impossible. But for those who have gotten out of debt for good, are still young enough to be debt free, or who have been able to avoid debt throughout their adult lives, here are some proven methodologies to avoid future debt instead of getting in over your head.
Live Within Your Means
It seems simple, but living within your means is the easiest tenet of debt-free living to forget. Many people find they are susceptible to “lifestyle creep,” which is what happens as you get older, work harder, and grow your family. Your monthly spending keeps growing and growing because you “need” more and more stuff. But the reality is, a lot of unnecessary things can creep into your budget. It is important to remember to practice thankfulness and to truly try and live within your means. If you master this concept, staying debt free will be no problem for you.
Establish a Savings Account
People often fall prey to debt by being unprepared when the unexpected happens. The easiest way to combat this is to start a savings account as soon as possible. It is never too late to start saving, and every little bit counts.
The best way to establish a savings cushion is to set a budget, find out how much you can set aside from your earnings each month, and then deposit that decided amount into your savings account before you spend anything each month. Whether it is $10 or $100, just save something. Make this easier on yourself by automating payments from your checking account into your savings. If you get a raise or receive a windfall, try saving at least 50% of it. Before you know it, you will have a nice emergency cushion. The emergency cushion should defray any unexpected costs without derailing your budget.
Learn to Use Credit the Healthy Way
Credit and debt often go hand in hand, but unfortunately you need good credit to be able to purchase necessary items like transportation and housing. Credit doesn’t have to be bad if you learn how to use it in a healthy way.
If possible, your goals should be to always pay off the balance every month and to never pay late. Credit can be a great way to access bigger ticket items, but only if you have a solid repayment plan in place. If you have a credit card, see if you can lower the interest rate in case you ever have to carry a balance in the future. In addition, create an online account so you can easily pay your cards online.
Want to be truly prepared in the event of the unexpected? Buy insurance. The most important of these is health insurance, as nearly 1.7 million people will be forced to file for bankruptcy due to high medical debt. Some prefer to take a chance on their youth and vitality rather than pay for health insurance, but what if you were seriously injured or ill for an extended period of time? Many do not come back from medical debt.
It’s the same with other types of insurance: having car insurance can keep you from having to pay out of pocket in the event of a wreck, and rental or homeowners insurance can protect your belongings in the event of theft, fire, or flood. Insurance can seem like a drag because it is a monthly line item expense, and when things are already tight, it can often be the first to go. But if you ever end up needing insurance, you’ll be glad you are covered.
With the right preparation (including the tips above) and a little luck, here’s hoping you can avoid falling victim to debt — both now and in the future!
Lauren Bowling is a personal finance writer at ReadyForZero, a website that helps people get out of debt faster on their own. She enjoys writing about all things finance, relationships, and self-esteem.
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December 9th, 2013
Being stuck with credit card debt can feel like an unending cycle. Whether poor spending decisions, a job loss, or a medical emergency got you to this point, the time to get out of debt is now. Solving your financial problems won't be easy work, but fortunately there are plenty of simple ways to generate extra cash from home that can help you climb out from under those balances. Read on for some ways to eliminate your debt as quickly as possible.
November 27th, 2013
The holidays can decimate your finances if you’re not careful, which is why it makes sense to be prepared. There are numerous ways to prevent debt during the holiday season, but the one factor all of these tactics have in common is that they require planning and forethought. If you want to save your wallet later on, clear your schedule and mentally prepare yourself for the holiday season.
October 28th, 2013
Paying off credit card debt is one of the best things you can do for your finances and your future. Unfortunately, it is also hard work! Here are 5 tricks to help you tackle your credit card debt and pay it off even faster.
October 26th, 2013
At Credit Karma, we love sharing numbers and helpful financial tips... so we decided to combine them both! In this week’s infographic, we look at how Credit Karma members are doing when it comes to paying off student loan debt. Scroll down to see the data and some payment strategies.
October 7th, 2013
Reducing debt rewards the steady, but there are also things we can do to get to our destinations more quickly. From cutting small expenses to going on a spending diet to forming a support group, here are some tips to help you speed along the way to financial freedom.
September 23rd, 2013
For most people, student loans represent their first encounter with the world of credit and finance. They can open a world of opportunity to young people who might otherwise not be able to pay to continue their education. More than 60% of American students (that’s almost 12 million in total) will borrow money annually to help pay for college. It’s likely that this is where you’ll begin to build your credit score: a little number with huge consequences. It can be intimidating, but there’s really no reason to stress out. Staying in control of your student debt is easier than it sounds. When dealing with loans, you should:
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July 3rd, 2013
Students heading back to school this fall with new student loans could be shelling out more money. The deadline to raise the federal student loan rate passed without a vote on July 1st. Congress left for the their July 4th recess with no resolution, allowing interest rates on new subsidized Stafford loans to increase to 6.8 percent from 3.4 percent.
June 26th, 2013
We tapped our Facebook followers once again to answer this member’s tough question: “My credit score is 549. I have $39,000 in debt but only make $145 per week. What should I do?" Here’s a few of the best responses we got:
May 30th, 2013
Welcome a new member to the online-only personal loan space! Chicago-based AvantCredit aims its unsecured loans at consumers with credit scores between 620 and 720—a nearly-prime community rarely served by other lenders. Like NetCredit, AvantCredit hopes to bridge the gap between payday loans and traditional personal loans. Its loans range from $1,000 and $10,000 and are payable over one to three years, depending on the terms you receive.