Freedom from debt is a goal worth pursuing, but it can be a challenge, especially in recessionary times. How do you keep yourself on a healthy financial track?
1. Build an emergency fund. This may be the single most important step you can take to avoid debt. How much should you set aside? Aim for six months’ worth of expenses. Then, after every time you dip into this fund for an emergency, be sure to replenish it. Having an emergency fund allows you to avoid using your credit card for emergency expenses, which is one way people can fall into unmanageable debt.
2. Know how much you spend every month, and really understand where your money is going. If you’re really serious about avoiding debt, invest some time in carefully tracking your expenses for a month or two. This will allow you to identify ways to trim unnecessary expenses, and free up funds to either build your emergency fund or pay down existing debt.
3. Create a budget, then stick to it. If you take advantage of the many excellent financial apps out there, like Mint or Quicken, you can have a budget set up in minutes, especially if you’ve already tackled step #2 above. These apps offer the added bonus of pulling your financial information together in one place, so you can easily stay on top of your money.
4. Automate your payments. You’ll feel the impact on your bank balance a little less, and be less likely to spend your money on less important things. If you’re a Jasper customer, take advantage of Jasper’s unique auto payment options. They’re designed to help you avoid credit card debt and build good credit with ease.
5. Already carrying some debt, and want to pay it down faster? Pay more than the minimum whenever you can. Challenge yourself to double up on your debt payments for several months. You may have to sacrifice a few things in the meantime, but you’ll make a big dent in your debt. Imagine the relief that will bring.
6. If you have more than one debt, prioritize paying down higher interest debt first. Debt can be a normal part of owning important assets like homes, cars, and businesses. Compared to these kinds of debt, credit card debt is “expensive” - even if your credit card has low interest rates. So, pay off your credit card debt first, especially your high-interest cards. Then, commit to carrying no credit card debt moving forward. You’ll save a lot of money in the long run.
7. “Right size” your expenses. If you frequently find yourself carrying a balance on your credit card, that’s a strong signal that you’re living beyond your means. Time to make adjustments to your spending. Maybe you need to move to a smaller home with a smaller mortgage or rent payment. Or maybe you need to cut back on your monthly entertainment expenses. Think of this as an opportunity to realign your spending to your priorities.
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