Wondering how to escape the debt trap? We’ll share some wise tactics to keep you at bay. Read on to know more.
It’s no surprise that more and more people are falling prey to the infamous debt trap. It is quite common especially for millennials to get into debt without realizing sooner. Millennial or not, it doesn’t take too long for anyone to get into debt given the rat races we run every day.
Additional Reading: Money Management Tips For Millennials
Most of us are engineered in a way that we want to excel at everything no matter what. We want to achieve certain things within a short time frame. The constant competition keeps us on our toes and there is immense pressure that we put on ourselves.
Often, we want to show what we’ve achieved to the world and therefore seek validation from others for our achievements in life. We are always showcasing the best versions of ourselves all over our social media pages.
And then it begins!
The pressure to have it all – the pressure to own a house, a car, to travel to exotic locations and eat gourmet food. This daunting pressure to succeed often blinds us into believing that we can indeed have it ALL. However, this is far from the truth.
Additional Reading: 5 Tips On How To Get Out Of A Debt Trap
Yes, you can have it all if you like. But you have to be practical. It doesn’t make sense to max out your Credit Card to buy that branded handbag. It also doesn’t make sense to default on your Home Loan simply because you can’t afford it anymore.
So, before you get into a debt trap, let us tell you how you can escape it. Are you listening? Make notes!
- Live within your means
If you can, you should print this and stick it on your mirror. Often we forget what it is to live within our means. It is easy to get carried away and go overboard when it comes to spending. If you use a Credit Card, be sure to use it wisely, don’t go about spending all your money on things you cannot afford. Get disciplined about your expenses. Don’t compare yourself to someone and try to live their life.
- Always do the math
Whether it’s your Home Loan, Car Loan or even a Personal Loan for that matter, before you take on any financial responsibility, always do the math. Calculate your EMI and understand what your potential financial commitment is going to be and how it affects all your other expenses. This will give you a fair idea on how you should go about your monthly spending.
- Allot budgets
Want to go on a vacation? Or buy a new watch? Make budgets for each of your wishes. It is easy to ‘want’ everything. But do you really need it? Ask yourself that and then if you really do, we suggest you go the budget way. Draw up an allotted budget for each of the items on your wish list. This will ensure you stay on track and not lose focus.
- Prioritize the expensive debts
Already have a bunch of open loans? Fret not! Figure out which of those loans are ‘expensive’ and swallow a large chunk of your monthly expenses. These debts need to be cleared immediately. A Personal Loan with an interest running in to two digits is going to be a far more expensive debt than having, say, a regular Credit Card EMI on any of your purchases. That said, don’t choose one over the other and completely ignore any debt. Just prioritize and work towards closing out the rather expensive ones first.
- Don’t add more to your existing debt
Having one too many loans may not work out for everyone unless you are super disciplined about repayments. Juggling more than two loans at a time isn’t a good idea as it can get overwhelming at the end of the month. Keep it simple and take one loan at a time. Don’t take on more than you can chew.
- Think thrice, not twice
It’s easy to pile on debt, especially Credit Card debt. It’s easy to mess up with unlimited financial freedom. A great way to avoid spending on an impulse is by thinking thrice about what you’re going to purchase. Let your train of thought have these three important questions before you use your Credit Card.
- Do I really need it?
- How many times will I ever use it?
- Can I get a cheaper alternate to it?
Additional Reading: How Not To Fall In A Debt Trap While Doing Online Shopping
It is really tough to get out of a debt trap, but with these tactics you can escape it altogether. Want to get constructive with your finances? Well, be sure to explore the many options we have.