Avoiding Debt

Avoiding the Debt Trap
Here are some simple tips that may help you stay out of financial hot water.

  1. Never buy on impulse.

  2. Avoid going to sales.

  3. Set up a family budget and stick to it.

  4. Charge only the items you can afford to pay for now – if you had the cash on you.

  5. Reduce the size of your home, if necessary, to reduce the mortgage or reduce the rent. (Your biggest payment each week.)

  6. Never guarantee someone else’s loan.

  7. If you are in a partnership, make sure you know what the other partners are doing because you will be liable for their debts.

  8. If you have a company, protect yourself from the business debts by forming the company into a limited liability company and not guaranteeing any company loans.

  9. If you are investing, watch out for high-risk investments.

  10. Make changes to your spending habits, so you reduce the number of times a week you go to a restaurant, or instead of having a big family do suggest you have a picnic lunch.

There are many things you can do once you find yourself with debt problems.

Avoid Credit Card Debt
Use your credit card wisely; otherwise you will get buried in credit card debt. Credit cards are great to use for convenience or for emergencies, but don’t use your credit cards as you would cash.

Time to do something about Debts

The following statistics are interesting:

  1. The average savings of a retired couple in the USA amounts to only $7,000.

  2. 85% of Americans have a net worth (i.e. the difference between what they own less than what they owe) of less than $250.

  3. On average, they can expect to receive around 37% of the retirement income they need to live on comfortably.

  4. The average person works the first 130 days of each year just to pay taxes and another 180 days just to pay the interest on their debts.

  5. If you make the minimum payments on $4,000 of credit card debt, you will require almost 42 years to pay it off (and cost over $14,000).

  6. Over 90% of the average family’s income is spent on paying debts.

  7. If the average person just cuts the cost of paying for their debts by half and invests that money they will create over $1million for retirement within 25 –30 years.

It is therefore necessary to attack this burden of debt because of what it is doing to people.