If you find yourself struggling with late bill payments, mortgage fees, or other forms of financial instability, you may be in a place where you need to assess your debt to income ratio. Taking this preventative step can go a long way toward your long-term financial health, and can help you avoid financially catastrophic events such as foreclosure and other long-term consequences. While it can feel overwhelming to face the amount of debt that you may be struggling under, doing this is vital to your financial stability, and can empower you to strategize how you can meet your obligations while maintaining enough to care for your family. In this article, we’re going to explore best practices for avoiding debt, as well as strategies that you can use to help overcome debt you may be dealing with currently.
Working ahead: How to avoid debt
While we may work to avoid debt, completely avoiding it is nearly impossible in today’s financial landscape. In order to be eligible for large-scale purchases such as a home, you must have a history of credit. To do that, you need a credit card. That step normally is the start of debt accumulation for countless American citizens, which can amass at even higher amounts thanks to personal loans, student loans and financial aid programs, and extended payoff services.
Because of this, it’s vital to have a strategy in place to help you avoid debt wherever possible. Below are just a few steps that you can take today to avoid long-term debt and its effects.
1. Avoid raising your credit limit
Avoiding debt means minimizing your opportunity to enter into more debt. When you first get a new line of credit, it can be tempting to charge it up to avoid taking cash out of your checking account. However, you won’t want to do this long-term. Nor do you want to ask for frequent credit raises. Pushing the ceiling higher can result in overspending and abuse of the credit line, leaving you with a mountain of consumer debt to wade through. The debt on a credit card can also garner interest, which can compound and end up being more than your principal amount. This can put a significant strain on your financial resources and ability to pay it all off.
2. Avoid payday loans
Payday loans are often portrayed as “free” money that you can access immediately, making this an attractive option to those in need of an urgent, short-term loan. While this is attractive, it is too good to be true. Many of these types of services have sky-high interest rates and absurd amounts of fees that can instantly deplete your resources. They also can open you up to entry into a vicious cycle of debt.
3. Create a strategic spending plan
You don’t have to avoid spending to live in a financially healthful way. You can create a strategic spending and savings plan that will enable you to save for the big things (such as vacations, experiences, and large purchases) while giving you a solid quality of life that is within your means. This strategy also empowers you to make decisions that could pay off in the long run, such as opening a Roth IRA or investing in a high-yield savings account (HYSA).
How to overcome current debt and live financially free
If you’re dealing with a significant amount of debt, it’s likely that you want to find a way to live financially free. While this is possible, it’s important to acknowledge that this may take time. It’s about the journey to debt-free living, not the destination! Below, we’ve compiled a list of tips that you can implement on your journey to financial freedom to keep you as secure as possible.
1. Invest in a financial advisor
When you’re working to overcome your current state of debt, it’s important to invest time and resources into tools that will help you. If it is within your means to do so, consider investing in a financial advisor. You may also consider taking the time to create and implement a budget. Advisors can offer additional insight and strategy for your financial freedom plan, and work with you every step of the way.
2. Tabulate your debt
Creating a full list of your debt can give you a bird’s eye view, and allow you to properly prioritize your payoff plans. It can also help you to avoid late fees where possible and have vital information at a moment’s notice if you are working with collections agencies or a financial advisor.
3. Employ legal help to avoid foreclosure
If you are facing significant debt or foreclosure, it is important to secure legal assistance to ensure that you are covered and that your interests are protected. The experts at Ascent Law have years of experience in this area of law and have had a long track record of success with foreclosures in Utah. For more information, please reach out to us at (801) 432-8682. A representative will be able to assist you in booking an intro call to learn more about how we can help.
