Debt is a lot like smoking: it’s better to never start. Both foster bad, unhealthy habits that are incredibly hard to break even when you know what you’re doing is wrong. So here’s some tips to help you never form those nasty habits; to never get into debt.
|Don’t Get a Credit Card|
If you don’t have one, you can never get into trouble with ugly consumer debt. Credit cards are considered the quickest and easiest way to build credit, but they are also dangerous if you’re an impulse shopper. Be honest with yourself. If you’re not able or responsible enough to pay off your balance before it starts incurring interest, don’t have plastic in your wallet. “Then how do I build credit?” you ask. Consider taking out joint loans on things like car purchases until your scores are high enough to get bank loans on your own.
Use Credit Cards Responsibly
If you must get a credit card, think of it as more of a store rewards card. Use it to get benefits such as air miles or cash back at stores that your card provider specifies. Pay off the balance within 48 hours. If you don’t have enough money in your bank account to pay off the balance, don’t buy it! “Buy now, pay later,” actually means, “Temporary happiness now, financial struggles and stress later.” Completely dodge cards with annual fees.
Have a Savings Account
Life happens. And it usually happens at the most inconvenient times. Having money in your savings account will allow you to not have to change things when you get laid off, your car breaks down, or a family member catches an illness or gets an injury that is not covered by your health insurance. A general rule of thumb is to have enough saved to cover at least three months of your normal bills and living expenses.
Consumer debt is not the only imprisoning issue. Student debt can damage your lifestyle, as well. Before you take out tens of thousands of dollars in loans, consider what your expected salary will be for your chosen field. If you’re going to be an elementary school teacher making $32,000 a year, taking $40,000 in loans is probably not a good idea. Do everything you can to steer clear of private student loans. Their terms are usually less reasonable and even less forgiving. Other ways to pay for school include government grants and scholarships sponsored by your school or other organizations.
If you cannot afford school, it’s probably best not to go until you have a solid financial plan. The registrar’s office will not report any payments you make on time, but you can count on them reporting any missed or outstanding payments to crediting bureaus.
*These tips are admittedly hypocritical. While I dodged debt for a long time, it eventually got me. I don’t have a MOUNTAIN of it, but I’m currently working on breaking the nasty habit and living completely debt free.*
This post is a part of Women’s Money Week 2012. For more posts about Debt, see womensmoneyweek.com.