Best Ways to Stay Out of Debt

by John Csiszar, Demand Media
    Credit cards are convenient but make it easy to overspend.

    Credit cards are convenient but make it easy to overspend.

    While some debt, such as a home mortgage, can actually offer tax benefits, debt in general is costly and can be dangerous to your financial health. If you let your debts get out of control, the end result can be a bad credit score, lawsuits and possibly even bankruptcy. Simple strategies can help keep you out of debt so you can avoid all of these negative consequences.

    Budget

    If you go into debt, it's an indication that you are living beyond your means. Without planning, it can be hard to know just where you're overspending. Drafting a monthly budget allows you to see in black-and-white where your money goes. While you usually can't adjust your fixed costs, such as your car and house payment, you probably have discretionary areas where you might be able to make cuts, such as eating out and entertainment. Trim your expenses so that your total outflow is less than your income and you should be able to keep out of debt.

    Use Debit Cards

    Unlike credit cards, debit cards are tied directly to your bank account. If you don't have money in your account, you can't make a charge on a debit card. Since no credit is extended, you can't go into debt using your debit card. Be aware of any overdraft programs your bank might automatically extend you which effectively grant you credit if you overdraw your bank account while using your debit card.

    Pay Off Balances Monthly

    If you absolutely have to put some debt on your credit card, pay it off as quickly as possible. Interest charges can rapidly compound your debt, and before you know it you might be completely unable to pay down your debt. One way to avoid overcharging on your credit card is to allocate money from your bank account before you make any charges. As soon as the charges hit, use the reserved money to pay them off.

    Get Credit Counseling

    If you can't seem to manage avoiding debt using traditional strategies, visit a credit counselor. A good credit counselor can drill down to the reasons why you continue to incur debt and suggest lifestyle changes to cope with them. Talking through your situation with a counselor before you have real problems can help you understand both the consequences of having debt and the ways you can avoid problems.

    About the Author

    John Csiszar began writing in 1989 at the ERIC Clearinghouse for Junior Colleges. His work appears in various online publications, including The Huffington Post. Csiszar earned a B.A. in English from UCLA and served 18 years as an investment adviser and certified financial planner.

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