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Avoiding Debt

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How to avoid debt

Of course, not letting yourself get into excessive debt is the best way to manage your debt.

So consider the following tips:
  • Avoid bad debt – if you can’t afford that plasma TV, don’t get it! Save up for it instead.
  • Don’t be tempted by In-store finance – even if it’s interest free and no repayments for 12 months, unless it is something you really need, don’t get it. It’s better to save up the money and then negotiate a better deal for paying cash.
  • If you do take up an in-store finance offer, fully pay off the debt during the interest free/ no repayment period so it doesn’t become a big debt once the interest charges start. Just calculate the required payments by taking the total amount of the finance and divide it by the interest free period in weeks – that’s how much you need to be paying off every week.
  • Be very careful with credit cards – they are very convenient for groceries and paying bills, but the risk is you spend more than your budget. If you normally take $100 cash to do your groceries, then don’t spend more than $100 with the credit card.
  • Only use credit cards for your day to day purchases and NEVER use them as credit for a ‘loan’ – they attract huge interest rates and it will cost you heaps.
  • Always pay off your credit card bill every month to make the most of the interest free period and so you don’t get charged interest for your groceries!
  • Only go into debt as much as you can afford to repay. Don’t be tempted by non-bank lenders if a bank has turned you down based on your ability to repay – they do this for a good reason and you should think very carefully about whether you can really afford to make loan repayments.
  • Avoid Gambling - or at least gamble responsibly. And get help if you have a gambling addiction.
Remember that debt is not bad, it’s all about how you manage it.
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