Deleveraging is a great achievement – but it doesn’t stop there! With 77% of American households bearing at least some type of debt, you are not alone in your battle. Besides, there are temptations everywhere. You need to maintain the good financial habits that you used to get out of debt in order not to get into debt again.
Don’t let debt hold you back. To stay debt free, you need to realize the habits that got you there in the first place. This is how you can prevent getting into debt again.
Get rid of credit cards that you don’t use
According to Experian, the average credit card balance at the end of 2020 was $ 5,897; The outstanding revolving debt is increasing. You might avoid using credit cards to avoid going into further debt, but it can be tempting to use up your available balance again.
To avoid getting into debt again, get rid of credit cards that you don’t use and cut them up. Making the card unusable is a great way to stop until you maintain good spending habits.
If your focus is also on building credit, don’t close those credit card accounts just yet. You can benefit from a longer average credit history by keeping credit card accounts open even when you are not using them. However, if your card has a high annual fee or you are concerned that you might continue to spend money, closing the account may be a better option.
Build an emergency fund
With so many people relying on credit cards for unexpected expenses, an emergency fund can keep you from building up debt again. A good rule of thumb is to have three to six months of spending in your emergency fund, but some experts recommend a smaller amount if you are paying off debts.
An emergency fund enables you to live on the funds in this account for a few months if something happens. You can use these funds during periods of unemployment or for home repairs, medical expenses, car repairs, etc. Even if you save a small amount from each paycheck, it is a good financial habit and can help you avoid falling into debt again.
Earn more, spend less
If you are nervous about going into debt again, focus on good spending habits and, if possible, increase your income with a part-time job. There are many ways to increase your income online, through gig apps, or through a part-time job. As you make more, you can save more money for your emergency fund or as a cash buffer. Make sure not to puff your lifestyle as you earn more, which ruins the whole purpose!
Budgeting is a great financial habit; And if it has helped you get out of debt at all, it will only do you good to hold on to it. There are several ways you can benefit from maintaining a household budget:
- Helps you control your expenses
- Keeps you updated on your financial goals
- It can help you be financially satisfied
- It prevents you from being financially overwhelmed
- It helps avoid or get out of debt
- It helps you stay organized
- It helps you prepare for emergencies
When you know where your money is coming from and where it’s going, saving yourself from falling into debt again is a breeze.
Don’t Get In Debt A
Getting out of debt is hard, and staying in debt can be even harder. You need to keep up with the good financial habits that you have learned if you want to stay debt free once and for all. These habits will help you for years.