It’s safe to say being in debt is not a financial situation many would want to find themselves in. There are several negative effects of being in debt, such as depression and anxiety. This is why being able to live debt-free is both liberating and important. However, with the average American adult incurring debts of about $58,604, it is no surprise you may wonder if you can enjoy and remain debt-free for a long time. Fortunately, you can! Here are five ways to ensure you enjoy a debt-free life.
Build on your savings
The main reason why you would end up in debt is that you do not have enough money to carry out various activities. Therefore, building on your savings is an effective way to prevent debt. There are several ways to ensure you have a sizable savings account. For instance, you can consider taking advantage of investment opportunities. You should also consider picking up side hustles. Side hustles are a great way to earn more in addition to your main source of income. This additional income goes a long way to add to your savings. In homes where one parent or partner earns the income, you can consider finding ways to earn extra income to assist. For example, stay-at-home moms can find lucrative online jobs from home for moms.
By building on your savings, you can ensure you are prepared for life’s unexpected expenses. This prevents the need for loans, which leads to debts.
Keep an emergency fund
Life is filled with unexpected circumstances. Financially, you may face unforeseen situations such as hefty medical bills, a job loss, or home repair expenses. This can put you in a bind unless you have an emergency fund. An emergency fund is money you set aside to cater to financial situations you did not foresee. This strategy helps you stay afloat during such unforeseen circumstances preventing the need to make decisions that could lead you to debt. When creating an emergency fund, it is advisable to do so in little bits. Other experts recommend using an autosave service to make the deductions easier to make. It is also important to note that your emergency fund should contain at least three months of expenses to ensure it is effective.
Manage your credit card debt effectively
The truth is, credit cards are so convenient! All you have to do is carry a card and simply swipe it whenever you make a purchase. Next thing you know, you are piling up on credit card debt. Therefore, it is important to be cautious when using your credit card. An effective way of avoiding debt is to pay your credit card debt immediately. To do this, you should consider creating a plan on how you would clear this debt quickly. There are two ways to clear your debt: snowball and avalanche. Be sure to educate yourself on these methods to select the right one. You should also consider using cash for payments more often. This prevents the chances of overspending and incurring debt.