Debt is a double-edged sword. You’re scared of going into it but you’re also scared of what you might miss out on if you don’t.
Is having the life you want and avoiding debt even possible? What level of debt can be manageable and even healthy? We’ve got some answers for you.
Read on for some tips on common types of debt, as well as strategies to avoid them and avoid debt altogether. We’ll also talk about how to get back on your feet if debt has knocked you down.
Credit Card Debt
Credit card debt occurs when you spend more on using a credit card than you pay off each month. If you continually make only the minimum payment on your card, while purchasing bigger-ticket items, you’ll quickly find yourself in credit card debt.
How to Avoid Credit Card Debt
Credit card debt is easy to accumulate and adds up quickly. If you’re looking to avoid getting into trouble with credit card debt, here are a few tips for you.
First, don’t spend more money than you have in your account. Treat your credit card like a debit card that’s going to take your money away immediately after a purchase, and you’ll be much less likely to end up spending more than you have available to pay.
In addition, don’t have too many credit cards. Or if you already have too many, don’t carry them all with you. The principle at work here is that you can avoid a lot of spending by simply making your credit cards inaccessible to you at purchase time.
Another trick as more and more shoppers move online is to not save your credit card information on websites. That way, you’re forced to type it in each time, and during this time period, you might realize you really don’t need to make the purchase after all.
Lastly, recognize the signs that you might be at risk of credit card debt. If you see your balance and know you can’t pay it off, adjust your spending habits until you’ve paid off your balance and are back in a good spot.
If your income decreases and your spending habits don’t, this might be an indication that your credit card balance will go up. Being aware of your financial situation will help you better manage it.
Medical debt can come suddenly and unexpectedly, or build up over time. Medical expenses can add up quickly and become unmanageable, which is part of why medical debt is so prevalent today.
How to Avoid Medical Debt
You might have an upcoming medical procedure or find yourself in a situation where you’re having trouble covering your medical expenses. Here are some tips to help you avoid getting too deep into medical debt.
For starters, you definitely want to check what your insurance will or won’t cover when it comes to medical procedures and expenses. This may require that you get on the phone with a representative from your insurance company or even schedule a consultation in person. So, you’re clear on how much insurance will cover and how much will be your responsibility.
Obviously, the easiest way to stay out of medical debt is to not seek medical procedures that are not covered by your insurance. That being said, medical procedures are often unavoidable, and you may end up with expenses beyond what you expected when you budgeted out your month or year.
Thus, if you’re already in a situation where the medical bills are stacking up, there are still some ways to minimize the amount of long-term medical debt you’ll have.
One option is to talk to your insurance provider about a payment plan. These plans often have low interest rates and give you time to get your finances in order after a large medical expense.
Another option is to try to negotiate your medical bill with the doctor or hospital where you received care. If you can get your bill lowered to an amount you can pay, you won’t have to go into debt to pay it off.
If these options fail and you still have a large medical sum to pay, consider taking out a loan with a low interest rate and monthly payment plan. It might be a better option than paying off your medical debt with a credit card or other high-interest loan.
Personal Loan Debt
Personal loans come in many different forms, and can be very appealing options to people because they can typically be used on whatever you want to. However, falling into the trap of personal loan debt is a lot easier than getting out of it.
You can get a personal loan for a number of reasons, such as consolidating your debt, paying for your dream vacation, or funding home improvements. If you have a payment plan in place to pay off a personal loan after you get it, you won’t remain in personal loan debt any longer than it takes to pay off.
However, many people get lured in by the attraction of paying for an expensive lifestyle with a loan. But, they don’t have the necessary income to pay off personal loan debt in a timely manner. If you’re the kind of person who likes to spend now and plan later, you might be at risk of personal loan debt.
How to Avoid Personal Loan Debt
So, how can personal loan debt be avoided? The simple solution is to create a budget, preferably with a certified financial planner or other type of financial consultant.
With a budget tailored to your income, expenses, and goals, you’ll be much more able to control your spending and avoid taking out unnecessary loans. Part of the beauty of budgeting is saving up for what you want and paying for it in full, which means you can avoid taking out loan after loan to fund the lifestyle you want.
The Bottom Line
Debt is tricky, and if you can avoid it for the most part, you’ll generally be better off mentally and financially. Being aware of the types of debt that people often get trapped in is a crucial step in making the best decisions for your unique financial situation.
However, if you find yourself with more debt than you know what to do with, you don’t have to lose hope. Many debt relief companies exist to help you get on your feet again financially if debt has knocked you down.
You can also meet with a financial advisor to get a sense of what your options might be. While potentially a little daunting at first, it’s one of the best things you can do to either avoid debt altogether or get out of debt if you’re already in it.
Overall, your financial situation is yours to control. And you can take steps today to avoid debt and create the future you want for yourself.
You Might Also Like
May 30, 2023
September 7, 2021