You’ve worked hard to get out of debt and I salute you for your efforts. Getting out of debt is never easy, especially if you’ve had a mountain of debt. I read an article recently about a couple that had been $150,000 in debt but had worked themselves out – over a five-year period. I can’t even imagine the stresses they must have felt about all that debt, and I certainly applaud then for doing the right thing and repaying all their creditors.
You must feel great to now be debt-free. What you don’t want to do is have a relapse and get back into debt after all the work you’ve done to become debt free. Unfortunately, many people have debt relapses and fall back into those bad habits that got them into trouble in the first place. To me, getting in and out of debt is similar to dieting. Many people will diet successfully, lose 30 to 40 pounds, then relax, stop dieting and gain it all back again. Debt is something like that. When you reach your goal – to be debt-free – you can’t just stop watching your spending or in a year or two you’ll be right back where you started.
Pay cash for everything possible
Maybe this seems simplistic but the first step in avoiding a debt relapse is to pay cash for everything possible. Using credit is probably what got you into trouble in the first place and the best way to stay out of debt is to simply quit using it. You should have one credit card but not use it unless you have an emergency or if you know you can pay off your balance the day you receive your statement. A credit card can be a great thing if you use it wisely. Many of them now come with cash back and other rewards that can be quite helpful so long as you use the card carefully.
Understand the difference between good and bad credit
Many financial experts now differentiate between good and bad credit. Good credit is credit that helps you build your net worth, purchase something that will save your family money for many years or helps you invest in yourself. One example of good credit is a mortgage as it can help you build your net worth. Another example would be a loan to weatherize your house, which would lower your monthly utility bills. And borrowing money to invest in yourself could be getting a loan to upgrade your skills or go back to college so you could earn more money or move on to a better career.
The prime example of bad debt is credit card debt unless you pay it in full as soon as you receive your statement. Other examples of bad debt include debts that have high interest rates and low monthly payments. and borrowing money from unsafe lenders such as payday lenders and finance companies.
Create or stay on a budget
If you used budgeting as a tool for getting out of debt, you need to make sure you stay on your budget. If you haven’t been on a budget, you need to create one. Budgeting is the key to managing family finances. A budget can help you keep your spending under control and save money to you achieve your short-and long-term goals.
Save instead of spending
When you need to make a major purchase such as a refrigerator or washer/dryer, don’t rush out, buy it and put it on your credit card. Instead, develop a savings plan and put away an amount of money each month towards the purchase. You may have to wait a few months before you get that refrigerator or washer but you won’t have put yourself in debt to get it.
If you’re not yet debt-free
If you have struggled mightily but have been unable to pull yourself out of that pit of debt, let us help. Our debt consolidation providers have helped thousands of American families become debt free and could likely help you. Call our toll-free number today for more information and be sure to ask about our simple 100% satisfaction guarantee.