By Herrick Louis
Your financial well-being is one of the most important investments you can make. Given today’s economic challenges, planning may pay dividends. Have you started taking the appropriate steps to avoid debt? If not, here are five key strategies to get ahead of it:
Create a Budget and Track Your Spending
Creating a budget is a great first step to getting your finances in check. By writing out a budget and tracking your monthly expenses, you can better understand where your money is going. Identify areas where there might be some leakage, cut those costs, and redirect the savings towards something more productive. Creating a budget and tracking your expenses will be habits that could pay off later.
Develop an Emergency Fund
Having an emergency fund is like an umbrella for a rainy day when you need quick cash. Typically, you want to save 3-6 months of your annual salary to cover expenses, such as job loss or unexpected situations depending on your needs. This will allow you to avoid relying solely on credit cards or loans. It’s comforting to have some extra money around and may help you reach your personal objectives.
Use Credit Cards Wisely
You should avoid using credit cards for purchases you can’t pay off immediately. Pay off your credit card in full every month. Limiting the number of credit cards you have reduces the risk of accumulating debt and makes it easier to manage your payments. You should keep your number of credit cards low, a good goal would be 1-2 cards max. Be aware of high-interest fees, as they can be detrimental when managing your money. Assessing how you use your credit cards is vital to avoiding excessive debt.
Develop Better Spending Habits
It’s okay to splurge, but too much can be a problem. Identify and eliminate unnecessary, impulse purchases. Focus on needs rather than wants. For instance, reduce dining out or online shopping and prioritize essential expenses. Collecting coupons and taking advantage of discounts can help you save on groceries and other necessities, freeing up extra money to build a financial cushion. Find your fix; it could be as simple as making sure that you’re not spending money on streaming platforms that you are not using.
Save Extra Income
Got a raise at work? Great! Celebrate by saving that extra money for other future objectives. Continue living on your previous salary and save the additional funds. This approach allows you to build your savings without adjusting your lifestyle. The additional savings can be used for investments, emergencies, or other financial goals, helping you stay out of debt.
Wealth Management Resources is here for You
If avoiding debt seems intimidating, we are here to help. At Wealth Management Resources, we can help you gain confidence in your financial planning decisions. We encourage you to contribute towards your IRA or 401k while paying down your credit card balance. Let us explain all your debt avoiding options and other available strategies. At Wealth Management Resources, we take pride in helping you stay on track towards your financial goals.
Wealth Management Resources is a Registered Investment Advisor. Herrick Louis is a student at Bryant university, an intern with our firm, and guest contributor to the Wealth Management Resources website blog. The Information provided is of a general nature and should not be constructed as investment advice or to provide any investment, tax, finical or legal advice or services to any person. Additional information is provided on our Form ADV part 2 available upon request or at the SECs Investment advisor Public Disclosure Site at https://advier info.sec.gov/firm/summary/454552