Get Your Sorted
One of the best debt free tips to clear up your overall debt is with a debt consolidation loan, one of our primary services.
We have a loan specifically designed for this exact purpose, up to $30,000 where you roll all your debt into one easy to manage payment.
Apply online, get sorted and be on your way to becoming debt-free.
Debt Free Tips
Financial advice often stresses the importance of spending less than you earn — but it doesn’t always explain how to stay out of debt in the long-run.
Here are six habits anyone can apply to their financial life to help stay debt-free.
1. Manage credit card balances based on cash on hand
Credit cards are a great way to “buy now, pay later” but it pays to make sure you have the cash on hand that you could theoretically use to make a purchase before you put it on plastic.
This strategy empowers you to enjoy the benefits of credit cards while ensuring you won’t be faced with a credit card balance you can’t pay in full.
2. Monitor spending with a self-imposed credit limit
The amount of your credit limit you use compared to the amount of credit available is an important factor in your credit score calculation.
There is no specific ratio that causes a person’s credit score to drop, but it’s a good idea to keep your credit use relatively low. Aside from the positive impact this could have on your overall credit score, it forces you to stay aware of your credit card balances, and to be mindful about spending.
3. Limit housing expenses
When living expenses take up at least half of a person’s income, they are often forced to make financial sacrifices in areas like health care and retirement savings, and are more likely to fall into debt. Do you really need the latest 60″ TV to keep up with your friends for example. Putting that and other furniture on interest free terms might also sound like a good idea, but it adds to your monthly outgoings.
4. Pay yourself first
More than half of Kiwis don’t have at least $500 saved to cover an emergency expense. A basic premise behind how to stay out of debt is having savings you can rely on if you’re faced with an unexpected expense. At minimum, experts recommend you build an emergency savings fund that could cover three to six months of basic expenses (and, potentially, as much as one year’s worth depending on your level of job security).
Make automatic contributions to a savings account earmarked for emergencies from every payday, even if you can only afford to save a little bit at a time.
5. Make it your mission to avoid unnecessary fees
Consumers collectively pay financial institutions millions in overdraft and non-sufficient funds fees, Furthermore, a survey revealed that the most common credit card fees include those for late payments, cash advances, returned payments and balance transfers.
Be sure to read the cardholder agreement and terms and conditions for your financial accounts so you’re aware of the fees associated with them. For example, many credit cards offer a grace period on new purchases; you could avoid paying finance charges when you pay the balance for that statement in full by the payment due date.
Credit card balances associated with balance transfers and cash advances may not offer a grace period, and could include additional transaction fees. If you don’t understand the potential fees associated with different financial transactions, contact your bank or credit card issuer and ask before you take action.
Again, we don’t recommend the use of credit cards in your financial management – they are not designed to help people stay debt free.
6. Don’t give your budget a raise
The challenge to becoming debt free isn’t associated with your income so much as it is your ability to avoid spending more, once your earning power increases. Got a raise, bonus, tax refund or inheritance? Put it towards your high interest attracting commitments or directly into an account that pays you interest; it may help you grow the value of your cash.
Not only does this strategy help you work toward financial goals beyond how to stay out of debt, but also by limiting your expenses, you increase the likelihood that you will remain debt free for life.
The fastest way to become debt free is to take action.
Apply for a debt consolidation loan and if approved:
- pay those credit and charge cards off, once and for all
- cut the cards up (this probably should be step 1)
- cancel them – we can produce cancellation letters for you
- relax – you’ve now got one obligation to manage and eventually you’ll become debt free
Loansmart – moving you forward!