Don't Let Debt be a Financial Dream Killer
One of the biggest obstacles to achieving financial independence is debt. At the very least, debt can delay financial independence, which can increase the cost to achieve it. Your goal should be to avoid debt at all costs. Every dollar you borrow to pay for something could cost you as much as two to 10 dollars to cover the cost of borrowing. That’s two to 10 dollars that is not working for you to achieve your financial goals. The keys to avoiding debt are to live under your means and pay for everything with cash. Credit cards can be useful tools in managing your personal finances, but it if you can’t seem to pay the balance in full every month, you should just put them on ice. Here are some additional tips to avoid going into debt:
Live by a budget: Most people go into debt because they place no limits on their spending. A budget is a spending plan that keeps you in control. Using debt to fund a lifestyle is like paying an assassin to track you down. It will catch up to your eventually.
Just pay with cash: Studies have shown that people are more reluctant to part with cash than they are to swipe their credit card. That’s because you have to actually count your cash when making a purchase, so you can see what’s going out. With a credit card, or even a debit card, there’s less of an emotional or physical connection with your money.
Never shop without a list: People who use their credit or debit card for shopping are more likely to spend over their budget on impulse buys or small splurges. If you are going to use a credit or debit card, always shop with a list and stick to the list. The worst thing to do is to go into debt paying for things you don’t really need.
Become your own bank: Things will always come up that require spending beyond your budget. Instead of using a credit card or taking out a loan, borrow the money from yourself. Unexpected expenses are why you should use your emergency fund. If you need $500 for a car repair, take it from your fund, but have a plan to pay it back. Don’t have an emergency fund? Make it a priority right now.