Almost everyone accumulates some personal debt along the way. This debt is not a big problem for most people. Debt can be disastrous if it is allowed to grow too large or if the family income is drastically reduced. By managing personal debt, many of the pitfalls associated with debt can be eliminated. A few guidelines can help you keep personal debt from becoming a serious weight on your lifestyle and future.
Know your finances.
If you have to guess about your bank balance or the size of your outstanding debt excluding your home mortgage, your finances are heading out of control. Denying the existence of excessive debt is just about the worst financial mistake that you can make. Debt never resolves itself. It requires diligence and hard work to get rid of it. Take the time to know how much money that you have available and how much debt you owe.
Avoid mortgaging your future.
Owning a home is a good thing. There is almost not a downside to home ownership if you buy a house that will meet your needs and fit your budget. The temptation when buying a house is to buy more house than you need or can afford. A mortgage that you have trouble qualifying for may be a move to face years of being financially shackled.
Always work to reduce debt.
Consider debt to be a challenge. The only good loan is the one that you just retired. Make payments on time. When it is possible, pay more than you are required to pay. Play your debt like a game. Try racing rapidly to the finish line.
Never use credit lines to service payments on debt.
You cannot borrow your way out of debt. If a consolidation loan can help you through a tough place financially, use it. However, if you want a consolidation loan to free up more cash so you can borrow more money, it is a serious mistake. Do not fall into the trap of using open credit on one card to get cash advances to make payments on other cards. Try not to trade debt for debt. Pay debt off and be finished with it.
Do not make any purchase on credit that could be made with cash.
Fortunately, most of the propaganda about buy now and pay later is fading. Credit card issuers still try to get you consider your credit line as a natural extension of your cash. The reality is that every time that you opt for using your credit card, you are going farther into debt. The objective should be to exit debt and not to get in deeper.
Resist the urge to take on debt that you cannot afford to easily repay.
Everyone from car dealers to real estate agents work to extend your limits when it comes to debt. Buy a bigger house or a more luxurious car. This makes bigger commissions for them, but it will probably not add much to your happiness or lifestyle. Live within your means. If you must take on debt, keep it as small as possible. Learn to live with less.