Debt : 10 Tips For Avoiding It During Difficult Economic Times

by : Louisa Mendez

Personal debt can be painful at the best of times, but at times of economic slowdown and recession that pain can quickly turn to disaster. Today is a good day to prepare for the worst, and here are a few tips to help you do so:

If you're not already in the habit of saving money then start putting at least 10% of your monthly income into a high interest savings account. Then, if you are confronted with an unexpected expense or a sudden financial emergency, let these savings can come to your rescue, NOT a personal loan or credit card. If you can't find that 10% then look at ways of freeing up cash, such as those described below.

Budget. Take the time to sit down and accurately work out your monthly expenses, then take those figures and calculate your annual expenses. If they are close to matching or, worse, are actually exceeding your income then you need to come up with ways of reducing your outgoings. This means cutting down on the non-essentials. Now it may be that eating one or two fewer donuts or drinking three or four fewer beers each week is going to require some will power, but you will appreciate the savings further down the road. Anyway, when you examine your expenses and see how much money you actually spend on donuts and beer each year, the shock and horror will probably be enough to get you to change your habits.

If you must carry a credit card, use it for emergencies only. Avoid making any spur of the moment purchases on plastic: credit cards somehow make buying seem less "real" and it's easy to fall into the mindset of a frivolous buyer. The last thing you want to do be doing when money is tight is accumulating more debt.

Before you make a purchase, ask yourself if it's something you really need or just something you really want. If it's not essential then train yourself to say 'no' Then to get over the pain of denying yourself the latest cd, book or designer pair of jeans think about how all those savings are accumulating in your bank account and daydream about the holiday you're going to treat yourself to when things are less worrisome financially.

If you already owe money then make a concerted effort to eliminate your debts, by first studying the small print on all your loans and credit cards and then by paying off those creditors charging the highest interest. It's those that will hurt the most if the economy takes a further turn for the worst.