Effective Tips For Avoiding Debt

There are very few of us who are immune to debt. Well, I’m one of them. I can proudly say that I don’t owe anyone a dollar to date. Well, don’t be under the wrong impression that I’m trying to blow my own trumpet. It’s just that I’m trying to convince you that life even in the most economically lean times can go without a debt. Only you need to do some good planning.

Positive Debt

I do agree that under some special conditions you need to debt, and the situation need not be always negative. When you take money on loan for starting a new business venture, for higher studies, for going abroad or for purchasing a new property, you are borrowing for a positive purpose with the intention of earning higher returns from them in future.

Borrowing money for funding your further development is something positive as you are sure to get your returns back. But here too you should be very careful. Don’t dream high especially when it comes to business ventures you should always measure your pros and cons before jumping into new projects. I know of so many people who are firm believers in business. They are over optimistic about things. They don’t study the niche market and their capabilities and invest in projects that ultimately don’t lead to success. Many dabblers in business are always led by their acquaintances or funding agents who show them a green picture regarding a business project. Don’t be led by others. Invest in a venture in which you have passion and you feel that you’re going to make it big. Also don’t venture out to make investments when you don’t have sufficient cushioning to take care of your survival in the event of a failure. There was this gentleman I knew, who invested some thousands of dollars in a project which failed during recession. He does not have financial cushioning to support himself and now he’s out on the streets drowned neck-deep in debt.

Negative Debt

Taking debt becomes negative when you are broke and need money to meet your expenses. In such a case you should first analyze why you’re broke in the first place. This shows that you haven’t been planning well. This is where you need to learn some money management skills to live within your income. Most of us want to live beyond our means. If you want to buy that new posh car that your neighbor bought you need to save up for that carefully and then buy.  Don’t give in to social pressure and lead a life beyond your means. It’s not necessary that you own the same commodities that your neighbors have to prove that you are of the same financial status as them. Respect is not built on the material that you possess but on your personal worth. Of course, I do agree that these days, society weighs a person’s worth on the fatness of his wallet, but its not that always it’s like that.

Don’t Buy Things on Installments

Nowadays, I’m bombarded with requests from retailers who want to offer me household goods on an EMI. Don’t you see those newspaper ads where they say “Buy a refrigerator at $1 at 0% interest?” Don’t trust these ‘0% interest schemes; they’re going to suck money out of you towards the end. Also the ones with very low EMI rates have the intention of extracting high amounts from you much more than what you would have paid by paying all at once.

My principle was to save up for a new item and go for it only when I have the money to purchase it. I don’t believe in gratification when there’s money due to someone. Better save up for it and them buy without a care in the world about any payments. What’s the hurry? Will you die if you don’t buy that new car today? Can’t you save up a bit and buy it a bit later?

Credit Cards Will Give You Money, But Remember you’ve got To Pay Back Too!

I’ve known many friends who are credit card addicts. From a pack of chocolates at the local supermarket to diamonds from posh stores, they buy everything under the sun by swiping credit cards. In fact, purchasing things on loan by using credit cards has become a habit with many people now.

Remember that crediting companies are very sweet with you as long as you pay your dues. But they can be the bloodiest hounds when it comes to chasing you for non-payments. They harass you and you might be jailed too for evading payments. There were cases of people selling their body organs to pay their credited dues.

Why do you need a credit card at all? I don’t own one because I don’t find the necessity to. Shopping is not particularly my hobby and whatever purchases I make, I do so with cash or bank check payments. But I do understand some people need to own a credit card. A friend of mine who’s a freelance web developer needs a credit card to have a verified account with Paypal to receive her payments. Also, if you happen to go out of your country regularly, you’ll need a credit card to make payments. If you own a credit card, see to it that you make ethical and appropriate use of it. Don’t use the card unless absolutely necessary.

Mend Your Attitude!

Last but not the least, I’ll say that many debtors borrow money or don’t make payments out of habit. I know a school friend who had the habit for asking for a loan and forget paying it back. Another example is of those people who open monthly accounts with grocers and utility merchants and postpone payments. These annoying habits can cost you a lot. Get out of the habit as soon as possible. Today, I can say that I don’t have a single dollar on debt because, whenever I’d take money, I always keep in mind that I owe someone money and make it my goal to pay them back at the earliest. You might think you’re being very clever by procrastinating payments by making up excuses, but these games don’t last for long. You’re going to be a victim of your own game one day. So better watch out!

I would like to conclude by saying that debt is not about borrowing money, but about re-paying it. There’s nothing wrong in borrowing money at the time of necessity, but see to it that you payback in time.