After you take a charge of reducing your debt through balance transfers, personal loans, or debt consolidation, you should make sure you stay out of debt. Slipping back into debt can happen in an instant if you do not alter the habits that caused the debt in the first place.
Debt happens when you spend more than you earn. Spending just $50 more a month than you earn is $600 a year plus interest fees. This is how a debt snowball can become an avalanche of a credit card balance. To avoid this in the future, make a budget and stick to it.
Look at your bills and past spending to calculate if you spend more than you make. Knowing where your money goes can help you plan.
If you spend more than you earn, you will need to cut costs somewhere. Separate your expenses into “musts” and “wants.” For example, living expenses are essential and you must continue to pay those expenses.
“Wants” include things like:
· Streaming services like Netflix, HBO, Disney+, and Hulu
· Subscription boxes like Stitch Fix, Ipsy, Barkbox, and Causebox
· Subscription services for hobbies like Audible, Blue Apron, and book of the month
· Everyday luxuries like coffee and impulse buys
· Video game and entertainment memberships
It may seem hard to go without these at first, but just stopping some to all of these recurring charges (even temporarily) can save you more than you might expect. If it feels like there is nothing to cut, then other small steps can help you be more financially savvy.