Beware of the urge to live off borrowed money
Not managing your finances strategically may hinder your well-being and may result in falling into a debt trap.
Today, let's cater to some of the basic (non-technical) fundamentals that may lead to a first stage for avoiding debt traps.
Track your expenses over income
Track your spending habits and categorize your expenses into needs and wants. Allocate your funds based on the two.
Budget preparation and allocation
Create a Realistic budget that outlines your expenses over income by allocating or by setting aside the proportioned amount for necessities such as housing expenses, rent, SIP's and other utilities. Sticking to your budget can avoid overspending on non-essential wants.
Emergency fund
Forming an emergency fund will help you in sustaining unforeseen losses without looking over credit cards and loans.
Maintaining at least about 6 months worth of living expenses will cater to all your hindrances and will try to give you an extra cushion in your challenging times.
Prioritise Debt repayment
Make Debt repayment as your first priority to overcome the burden and stress out of it. Analyse the high and low interest debt in your portfolio and allocate each month to pay off accordingly.
Keeping debt will always attract more debt.
Avoid spending beyond your means
Live for yourself not for other's !!
Avoid the temptation to live beyond your financial capabilities. Resist the urge to buy unnecessary items or indulge in excessive luxury. Focus on purchasing what you can afford rather than relying on credit and loans to fulfil your desires. By living within your means, you can prevent accumulating debt.
Usability of Credit card
Availing credit card and personal loans are easy these days.The consequences of a debt spiral are profound. It can hurt you financially, strain your income and ruin your credit score. Credit cards offer convenience, but they can also be a source of debt if not used responsibly. Pay your credit card balances in full each month to avoid interest charges.
Avoid taking loans for penny expenses
You must be cautious while availing loan offers. Short-term loans may have exorbitant interest rates and fees, trapping borrowers in cycles of debt.
Financial consultation and advisory
If you find yourself overwhelmed by debt or struggling to manage your finances, don’t hesitate to seek professional help. A credit counsellor or financial advisor can provide guidance on debt consolidation, budgeting and saving.
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