Avoid Excessive Debt

Everything in moderation is a good thing we are told,  when you tip over the edge of moderation  life becomes rather uncomfortable. 

 

So, how to avoid getting into excessive debt.... first of all you need to be aware of what is actually excessive and this is different for everyone.

1.             Itemise what debts you have

Sounds simple however many clients call us without a real understanding of what their debts are,  perhaps it is some kind of denial? 

Get in touch with what your debts are,  collate your statements and total it up.... surprised?  Most people are.

2.             Keep your eye on the ball

Now that you are aware of what your debts are,  repeat this exercise next month.  Sounds basic,  however the basic stuff works. 

Did your debts go up or down since last month?  Are you noticing any trends ie. days of the week when spending peaks?

Emotional or personally challenging times when your spending increases? What kind of adjustments can you be making to avoid a repeat of this exercise next month?

3.             Impulse purchasing

Most excessive debts are closely linked with impulse purchases,  you know the kind -   seemed like a good idea at the time,  too good a deal to pass up, pressure sales,  upsold by pushing sales person.   

If you are making a purchase, make it a conscious one, this goes a long way to avoiding excessive debt.

4.             Set a budget rather than a wishlist

For most people a budget is akin to swearing at them,  most have an idea of what kind of features they would like in their new car/ home/ holiday rather than looking at their budget and getting the most value for your dollar. 

If you have $25,000 to spend on a new car or can afford $500 per month in repayments have a look in that market for your purchase, don’t go tempting yourself in the next pricing category, you and the sales person will talk yourself into something you simply cannot sustain which will ultimately cost you more on many levels.

5.            Easier to acquire debt than to repay it

Key is avoiding excessive debt is being conscious about when you obtain it in the first place.  If you need a credit card for emergency purposes (lots of clients insist they need a credit card for this alone) then set a realistic limit. 

Don’t take up the offer of increasing limits when offered by credit card providers,  it is up to you to exercise some restraint and take responsibility for your purchasing habits.

6.             Do the maths

If the only way you can buy the new plasma TV is on interest free,  work out the repayments,  how much do you need to put away to avoid the 30% interest rate when the interest free holiday is over, what is going to change in 24 months for you to be able to afford this.... the big question,  do you REALLY need this?

Need support to help you manage your personal debts? click here.