29 Jan
2010

Why are some people hundreds of thousands of dollars in debt while others seem to enjoy the same lifestyle without spending a ton on interest on multiple personal loans? It’s simple: people who avoid loans and debt have a few tricks up their sleeve. Use these same tricks and you’ll be able to avoid new debts, too:

1) Set up savings accounts and emergency fund accounts. Set up at least two savings accounts – one for short-term purchases (like those new boots) and one for longer-term goals (such as a car). The more you save for your purchases, the less money you’ll have to borrow. Plus, make sure you have an emergency fund – it’ll spare you from having to rely on payday loans and other forms of emergency cash.

2) Budget. Without a budget, most of us make impulse buys that eat up our money but don’t get us ahead. Thinking about purchases and planning ahead are a must to prevent huge debts.

3) Take out one loan at a time. Rather than racking up credit cards debts, new car loans, home loans, and personal loans for renovations, people who aren’t in debt take it easy. They buy a car, wait a while and save up before buying a home. They pay down their debts before taking out more money.

4) Go easy on credit cards. If you can’t afford to pay for it with cash, you really can’t afford to pay for it with a credit card – you’ll be paying purchase price plus interest. Choose the best credit card for you and pay off the balance each month.