How to Avoid Ever Having To Go Into Debt

March 8th, 2007 • Related • Filed Under • by admin

When people go out to buy a new car, major appliance, or other expensive purchase, more often than not they use the store’s financing options or throw the purchase on their credit card to pay for their purchases. It’s very rare that people pay cash for such purchases now of days, and it seems that financing just about everything is a way of life. There are people that use their credit cards to borrow money for purchases even as small as one dollar.

Of course this borrowing is not without a price. When you borrow money, you’re going to have to pay more money than if you had just paid case for the purchase. There are some “zero percent’ loans, but they are deceiving, because the interest is built into the cost of the product and you would be able to get a discount if you paid in cash and asked for one. Paying interest is the nature of the beast that is debt and that’s just the way it is. Paying a little bit of interest isn’t necessarily a bad thing, however a lot of consumers abuse their credit borrowing on so many different things that the majority of their paycheck goes to payments, and they’re losing hundreds of dollars each month to loan interest. Don’t worry, there’s a way that you can avoid ever having to borrow money in the first place.

When it comes to avoiding debt, there are no magic secrets, just common sense. A lot of debt happens because people just do not plan. When one’s car breaks down for good, they have to buy another one. Most of the time we don’t plan for such things so we don’t have any money in the bank to pay for one, rather we just borrow the money, make the monthly payment, and forget about it. This cycle repeats its self ad naseum and people end up paying too much for vehicles for life. If people planned for their next car purchase after they got a car, they would not have to borrow money for their next car purchase. All one would have to do is save the amount of their car payment every month, and by the time it was time to buy a new car, they would have plenty of money to pay cash for a vehicle. Instead of paying the bank interest, they’re now paying themselves interest while saving for the next automobile purchase.

This same principle works for just about everything that people borrow money for. You know that you’re going to have to buy things within a certain amount of time, yet most people think that they don’t have enough money to save for such things. This is because most people don’t budget their income and just let their money slip away from them rather than telling their money what to do on paper on purpose.

What about those things that you can’t plan for, such as an automobile accident? In this case, you need to build yourself an emergency fund of three to six months of expenses so that when something unfortunate happens, you can just pay cash to get whatever broke fixed without having to borrow money.

There’s never really a situation where somebody needs to go into debt, but a lot of people end up in debt because of poor planning. You know that you’re going to have to make some rather large purchases in the next few years, why not save up and pay cash for them? You might argue that you can’t afford to save, but the fact is that you can’t afford not to save, or you’ll only end up deeper into debt. If there’s no money for you to save, you either aren’t doing a budget, or are stuck an immature entitlement mentality, and that’s reality.