The idea of avoiding debt seems straightforward. If you do not spend more money than you have, you can live debt-free. Unfortunately, it is not always as easy as it sounds. In a consumerist society, it can be hard to control your spending and manage money wisely-aside from all the emergency expenses that may drain your savings.
Debt is often not something that builds up overnight; it can slowly creep up on you. Here are three common debt traps you should avoid:
1. Financing your purchases
You can finance almost any purchase, especially when shopping online. While monthly payments may seem more affordable, you may be losing out on a significant amount of extra money in interest. Even zero-interest plans can give you trouble if a sudden expense comes up before you pay off the item. Get into the habit of resisting financing offers, and only buy what you can afford right away.
2. Signing up for monthly subscriptions
Nowadays, you can buy a lot of products or services in monthly installments. For example, you may subscribe to a video or music streaming service for entertainment purposes. While paying 10 dollars a month may not seem like a big deal, it can add up, especially if you have multiple subscriptions. You may need to forego some monthly services in lieu of saving money or repaying debt.
3. Failing to partake in financial planning
Financial planning is a crucial strategy for staying out of debt. Educating yourself about financial basics helps you avoid pitfalls and keeps you from going underwater. There are plenty of ways to get into financial planning, such as reading financial websites, installing financial planning apps and reading books.
You may assume that you are not someone to end up in debt, but still, the possibility exists. Take note of these three ways that you may fall down the slippery slope of accumulating debt.