Debt is a double-edged sword. You’re scared of getting into it, but you’re also scared of what you might miss out on if you don’t.
Is it even possible to live the life you want and avoid debt? What debt can be manageable and even healthy? We have some answers for you.
Read on for some tips about the most common types of debt, strategies for avoiding them and how to avoid debt completely. We’ll also talk about how to get back on your feet once debt is down.
Credit card debt
Credit card debt occurs when you spend more on using a credit card than you pay each month. If you only ever pay the minimum amount on your card when buying larger items, you can quickly run into credit card debt.
How to Avoid Credit Card Debt
Credit card debt is easy to pile up and quickly adds up. If you want to avoid the hassle of credit card debt, here are a few tips for you.
First of all, do not spend more money than you have in your account. Treat your credit card like a debit card that will withdraw your money immediately after a purchase and you will be much less likely to spend more than you can pay for.
Also, you shouldn’t have too many credit cards. Or if you already have too many, don’t carry them all with you. The principle here is that you can avoid a lot of expenses by simply making your credit cards inaccessible to you at the time of purchase.
Another trick as more and more buyers get online is to avoid storing your credit card information on websites. That way you are forced to enter it every time and during that time you may find that you really don’t have to make the purchase.
Eventually, you will recognize the signs that you may be at risk from credit card debt. When you see your balance and you know you can’t cash it out, adjust your spending habits until you balance your balance and are back to a good point.
If your income is falling and your spending habits are not, it could be an indication that your credit card balance is rising. Being aware of your financial situation will help you manage it better.
Medical debt can occur suddenly and unexpectedly, or it can build up over time. Medical expenses can quickly add up and become unmanageable, which is one of the reasons medical debt is so common today.
How to Avoid Medical Debt
A medical procedure may be pending or you may find yourself in a situation where you are having difficulty getting your medical expenses covered. Here are some tips to help you avoid getting into medical debt.
For starters, you definitely want to review what your insurance will or will not cover in terms of medical procedures and expenses. This may require you to call a representative from your insurance company or even arrange a personal consultation. So you know exactly how much the insurance covers and how much you will pay yourself.
Of course, the easiest way to stay away from medical debt is to avoid going through medical procedures that are not covered by your insurance. That being said, medical interventions are often inevitable and you can end up with expenses beyond what you expected when you estimated your month or year.
So, if you are already in a situation where medical bills are piling up, there are still a few ways you can minimize the amount of your long-term medical debt.
One option is to speak to your insurance company about a payment plan. These plans often have low interest rates and give you time to get your finances in order after major medical expenses.
Another option is to negotiate your medical bill with the doctor or hospital where you were treated. If you can get your bill down to an affordable amount, you don’t have to go into debt to pay it.
If those options fail and you still have a large medical sum to pay, consider taking out a low-interest loan with a 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 attractive options to people as they can usually be used for anything you want. However, it is much easier to fall into the trap of personal loan debt than it is to get out of it.
You can get a personal loan for a number of reasons, such as: B. to consolidate your debts, to pay for your dream vacation or to finance renovations. If you have a payment plan for repaying a personal loan after you get it, you are no longer staying in personal loan debt than it takes to repay it.
However, many people are drawn to the appeal of paying for an expensive lifestyle with a loan. However, they do not have the income necessary to pay off personal loan debts in a timely manner. If you are the type of person who likes to spend now and plan later, then you are 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 financial advisor.
With a budget tailored to your income, expenses and goals, you can have much better control of your expenses and avoid unnecessary borrowing. 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 largely avoid it, you will generally be better off mentally and financially. Being aware of the types of debt that people are often trapped in is a critical step in making the best decisions for your individual financial situation.
However, if you have more debt than you can start with, don’t lose hope. There are many debt relief companies out there that can help you get back on your feet financially when debt is down.
You can also meet with a financial advisor to get a feel for your options. While this might be a little daunting at first, it is one of the best things you can do to either avoid debt altogether, or to get out of debt if you are already in debt.
Overall, you are in control of your financial situation. And you can take steps today to avoid debt and shape the future for yourself.
Common Types of Debt and How to Avoid Them first appeared on Credit.com.