How To Avoid Debt
In order to avoid debt and start saving, you should live BELOW your means. It may sound funny, but in order to remain financially fit, you must not spend every dime you make. The golden rule says to set aside 10% of your total income (i.e. what you earn) as savings. This will not only allow you to avoid debt, but will help you create wealth.
Some low and middle-income earners are able to satisfy their needs but the challenge is to avoid getting locked in unnecessary wants and become heavily indebted. Good money management is about understanding the difference between needs and wants and spending your money wisely and not incurring debt unnecessarily.
Pay off your cards on time
Being late with your bills makes your interest rates rise and also subjects you to interest rate increases and late penalties. Whenever possible, try to pay off your card balance in full. If this is not possible, at least make some payment on your card.
Carry cash
Studies show that customers who pay with cash tend to pay less than those who pay with credit cards. Those customers paying with credit are those who are most likely to overspend.
Using debt to pay off debt
When you use credit cards to pay off other cards and loans to pay off other loans you're not paying off anything. You're just shuffling your debt around and incurring more debt each time you do so. Balance transfers have transaction fees and most loans have some kind of down payment or origination fee. So when you use debt to pay off debt, you end up worse off than when you began.
You can also avoid making any purchases with your credit during peak buying seasons such as Christmas. Credit card companies charge you more interest during these peak seasons because they know that everyone is buying more items with their credit cards. Most of these companies will not make a point to tell you this, but they make a mint off of us at these times.