If utilized properly, credit can be useful. You can obtain loans to help you purchase a new car or house, for example, since it is normally hard to find sufficient funds for either in a savings account. However you should always bear in mind that any money borrowed must be paid back with interest.
If you do not pay close attention to your finances you will quickly run into financial difficulty, perhaps seemingly insurmountable difficulty! Some people wind up borrowing money simply to pay their debts, leading to a debt cycle that spirals out of control.
People find themselves financially strapped and consequently in debt from a number of means:
* Unemployment, regardless of the reason
* Unexpected bills
* Divorce
* Out of control spending well beyond one's budget
* Inability to put money aside for savings
* Inattention to mounting financial obligations
* Any catastrophic and expensive life event (e.g. severe auto accident)
Below are a few tips to help make sure you don't get even further into debt if you are already struggling.
Commit to make and stick with a budget. Pay all your bills when you get paid, and resist the urge to spend unnecessarily beyond your income means.
Try to put aside ten percent, or more, of your wages for unexpected payments and emergencies, and do not spend these savings for anything else.
Think twice before you buy something; could you get the same or similar quality item elsewhere for less?
Don't rush into obtaining a loan. Take your time and make an informed, prudent decision prior to committing yourself to a repayment obligation.
Determine in advance interest rates for any loans you are considering. Make sure the loan will not mean you end up owing more money once an initial introductory period has ended. It is up to you to ensure you are getting the best deal available.
Don't own too many credit cards. You only need one or two - if any. Restricting your collection of credit cards will eliminate some of the temptation to spend more than you can afford.
An over abundance of credit cards is one of the most common ways people find themselves in debt. A lot of smaller amounts on several different cards can really add up and cause you unnecessary problems.
Here are a few ways you can limit your credit card use:
* Take advantage of the interest free period offered on some cards
* Pay every one of your bills on time, every time; yes, the full amount
* Use cash to make purchases
* Keep a very tight reign on your spending
* Leave your credit cards at home
Any missed or late payments are retained on your record and can work against you if you ever need further credit. If you try to pay more than the minimum required on your cards each month, this will significantly shorten your repayment time and make you more financially stable.
Your finances ultimately fall into the realm of your personal responsibility, so prudent restraint and attention to detail with your money will benefit you all your life.
