Savvy consumers also avoid other bad habits, such as using credit to close budget gaps, leaving a monthly balance to accrue interest, and using one credit card to pay for another. They know their credit limit, they can pay strategically during the grace period, and they know how to avoid fines — and what those fines will be if the card is abused. Savvy consumers know when the credit card’s grace period ends in each billing cycle, so they can pay off their accumulated debt for the month before interest accrues, minimizing the cost of using credit.
Instead of spending money whenever a desire or need arises, those who aspire to a debt-free life follow a monthly budget and keep track of the funds coming in and out of their bank accounts. People who aspire to a debt-free life have clear priorities in how they spend their money.
It takes discipline to get rid of your spending habits and give up the things you want so you can achieve your main goal of getting out of debt. Many people consider debt a necessary evil, but it is still possible to live and prosper without using debt or worrying about your credit history. Whether or not you have debts in the past, it is in your power to prevent them from appearing in your life in the future.
You can avoid any debt and your credit score will suffer no matter what. Anyway, what I like about personal loans is that you can get a fixed term, usually three to five years, with monthly repayments – you don’t want to make minimum payments, and you know your debt will end up will be repaid within the stipulated time.
You can use loans effectively to save more money for the future or buy whatever you want. As mentioned above, limiting unnecessary purchases, such as eating out, can help you invest more in debt repayment or avoid new debt. Let’s face it, saving money on groceries, insurance, banks, and other such things results in a nice annual savings and can be very helpful in paying off your debt.
But with many types of investments (also called diversification), you can still make your money work without ruining your financial future if one of your investments fails. While investing can create wealth, you also want to balance the potential return with the associated risk. There are many ways to invest, from very safe options like CDs and money market accounts to medium risk options like corporate bonds and even higher risk options like index funds. Investing can be a great way to increase your wealth over time, and investors have a range of investment options, from safe, low-yielding assets to riskier, higher-yielding assets.
Debt-free living might just be a life to aspire to, but it’s not something you should be obsessed with. We live in a capitalism-driven world, a huge part of which is driven by credit, so there’s value in using debt wisely. There is also lots of freedom that comes with living debt-free…
