Debt. We have all heard of it and most of us probably have some whether it be credit card debt, student loans, or medical bills. Debt is one of the easiest things to accumulate, but one of the hardest to try and overcome. However, just because it is hard does not mean it is impossible. There are 3 key ways to avoid debt and it all starts with managing your money:
Starting an emergency fund is one of the best ways to help your personal finances and avoid debt. Many experts suggest having 3-6 months of worth of income saved to cover unexpected expenses. With that money set aside, you will not be in as much of a bind if you need a major car repair, you lose your job, or someone gets seriously sick.
As you are building your emergency fund you are also forming good saving habits. Now, you do not have to try to save 3 months of income in one paycheck. Putting just a few dollars a week into your emergency fund can go a long way in the end. If you can swing it, try putting $10 a week into your emergency fund. If you can do that, then by the end of the year you could potentially build an emergency fund of $520. It may not seem like much, but it is a start.
One of the biggest causes of debt is student loans. Nowadays most jobs require at least an undergraduate degree when looking at potential hires and getting that undergraduate degree is not cheap. However, there are ways that you can avoid taking out large sums of student loans. Going to a community college for the first year or two or going to a trade school can potentially save you thousands in education costs.
No matter where you go to get your undergraduate degree, checking to see if the school offers scholarships is a must. Apply for as many scholarships as you can. These will help offset the amount of any student loans you might need to take out. Another, probably obvious, way to avoid student loan debt is to go straight into the workforce. Working for a while before you go to college is not a bad option because it gives you the chance to build an emergency fund and plan to cover college costs. It is a plus if you find an employer who will either pay for you to go to school or help you cover college costs.
The only way to be completely debt-free is to pay for everything in cash or with a debit card. Paying in cash or with a debit card gives you the opportunity to built self-discipline and to budget a little better. If you pay in cash, then you can only buy what you have enough to pay for. Now, if you are someone who maybe does not have an emergency fund in place or has readily available funds, this may not be the best option for you.
If you choose to go with this way to avoid debt, then you are going to have to create a budget. Becoming a budgeter will be a great strength as you try to remain debt-free.
The 3 ways to avoid debt listed above are only suggestions and should in no way be construed as financial advice. The author of this piece is not a financial advisor and this article is simply their take on ways to help avoid debt. If you want to implement any of these strategies yourself, please contact a licensed financial advisor.