Credit is good but paying in cash is even better. However, being debt-free these days is quite impossible. Many people are in debt not because they wanted to but to just simply survive and provide basic necessities for their families. For the past two years, a lot of people’s lives have been affected due to the COVID-19 pandemic. Many lose their jobs or their businesses that they ended up having a hard time making ends meet. Not to mention other calamities such as typhoons or earthquakes, that can destroy people’s properties and livelihood, which are their main source of income. Often, the only option here is to borrow money from a bank or financing company in order to help a person slowly rebuild his future. For others, their only option is to use credit cards while they do not yet have the cash to purchase.
The downside here is the possibility of people mismanaging their expenses and ending up in full debt. Having a debt is not entirely bad as long as you know exactly what to do with your finances. That is why, it is best to think wisely and clearly on how to manage your debt and expenses. Listed below are the 5 things to keep in mind or you can also click here to learn more:
Plan Your Debt
Ask yourself why you need to loan money. Is it really necessary? How much do you need to borrow? Are you certain you can pay the money that you owe within a certain time frame? With these questions in mind, it is wise to make a clear plan on how to best handle the money that you owe.
Borrow Only What You Need
If you have come to terms that you badly need financial assistance, take into consideration the amount of money that you intend to borrow. Focus only to things that you need to rebuild and try not to get tempted to purchase things that might drain your expenses in a short period of time.
Set Aside Emergency Funds
Sometimes, we tend to forget to set aside emergency funds. Even if we loaned money, we should set-aside a portion of that money for emergencies because we will never know what might happen. Unavoidable circumstances happen and if it would be difficult to manage our finances if we try to borrow again, knowing that we still have existing debts to pay.
Prioritize Your Debt
Common mistake to debtors is they do not pay the money they owe when they have already the capacity to do so. Prioritize them. That is called being responsible. If you want to borrow again, make sure to pay your debt first. And if you have multiple debts, pay the first ones with high interests until your debt is finally eliminated. It would be wise to pay your loans at a time than pay them one time that might endanger your other debts.
Check Your Budget
Live according to your means. Do not buy things more that you earn because this will surely lead you to full debt. Know your limits and try not to be tempted to buy things you do not need just because they are on sale.
You can view more here how one can get back on one’s feet, rebuild one’s life and think of a better way on how to be debt-free by the end of 2022.