Not everyone has succeeded in establishing financial discipline. Those with large disposable incomes sometimes spend extravagantly, and even those who seem to have the ability to make their money last until the next payday encounter difficulties in monitoring their expenses, and sometimes end up spending more than they earn.
This causes many to resort to loans to bridge financial deficits, which in turn plunges them deeper into debt. Things become more complicated if one is living from paycheck to paycheck with no sustainable side hustle to tide them over during the tough times. Yet often, when you conduct an audit on your personal spending, you might be shocked to realise you have been spending your hard earned money unwisely. Worse, you may be unable to account for large amounts of your own income!
Granted, the pandemic has had a negative impact on the finances of many organisations. Some have had to cut their workers’ salaries by a certain percentage due to dwindling financial returns, while others have had to let go of a section of their employees. It is not hard to understand, therefore, why credit facilities have become the most practical way out for so many. In light of this, here are some tips on how to avoid drowning in debt, regardless of your financial circumstances.
Watch your spending
Hanging out with friends sounds great, but it can prove costly at times. You may find it difficult to avoid buying food or drinks for your friends, and you may even be compelled to access credit facilities to cover this expense. You may console yourself that your job is well secured or you will receive your wages at the end of the next day if you subsist on daily pay. However, using your salary as a guarantee to take loans across mobile lending platforms is not wise. You may be just one paycheck away from job loss. The job market is extremely unpredictable, so be wise.
Don’t take a loan to clear debt
Many are those who find themselves in a vicious cycle of debt. No matter how hard they struggle to free themselves, they always seem to end up in more financial problems. You may find yourself borrowing from one source just to clear a pending debt, then you quickly apply for a fresh loan once you’ve been cleared by a lender. This shouldn’t be the case. You must be disciplined in your approach to money and develop sound spending habits if you are to stay out of debt.
Live within your means
Always have a list of priorities, and stick to it once you get an income. Many do not draft budgets whatsoever for their daily, weekly and monthly spending. They tend to spend spontaneously as the need arises. If this is the state of affairs in your life, it will be hard for you to gain financial freedom. A good spending plan should be tailored in such a way that expenses do not exceed income.
Clear debts ahead of time
If you are servicing several debts at the same time, begin with the ones that have high interest rates as they’ll attract stiff penalties in the event of default. It is always essential to pay debts in advance, or as soon as you have the money. This will help you avoid spending on unnecessary items while at the same time struggling with debt.
Develop a saving culture
Be prepared for any financial eventualities and save towards this. This money will cushion you against any emergency should you find yourself out of work. Unforeseen crises can result in some unpleasant surprises that can ultimately lead to debt if you have no saving plan.