| Debt is something we should avoid at all costs. If you don't believe me, you may want to take some sound advice from the Oracle of Omaha.
Warren Buffett, who is arguably one of the greatest investors of all time, once offered this advice to a young investor at a Berkshire Hathaway annual shareholder's meeting: "Just don't get into debt. It's very tempting to spend more than you earn, it's very understandable. But it's not a good idea." He added: "If you're deep in the red, it may be a good idea to never look at a credit card the rest of [your] life."
To be fair, no one tries (or wants) to get in debt. It's just one of those things that can happen and you may even feel as if it's out of your control. However, it is possible to get out of debt and stay out of debt.
The hardest part in trying to avoid debt is limiting yourself. Spending has become one of the most popular temptations in today's society. However, there are strategies you can use to avoid falling into a hole of debt.
Here are some common-sense rules to follow:
• If you can't afford it, don't buy it.
• Cut-out the wants, focus on the needs.
• Live within your means.
• Create a monthly budget and stick with it.
• Pay with cash whenever possible.
• Stay within your spending limits.
• Avoid impulse purchases.
• Avoid "buy now, pay later," "interest-free financing" offers that postpone debt.
• Compare prices before making major purchases.
• Take only the cash with you that you can afford to spend while shopping.
• Avoid borrowing to finance "staple" purchases.
• If you can't avoid borrowing, use the lender that offers the lowest interest rate.
• Avoid bank overdraft charges by keeping close tabs on bank balances.
• Keep a record of all credit card purchases.
• Pay off your credit card balances in full.
• At the very least, always pay more than the minimum payment on credit card bills.
• Avoid applying for more than one or two credit cards at a time.
• Consider transferring balances to a lower-rate card, making sure the low rate applies to balance transfers.
For more cool stuff like this, check out CNBC's Financial Advisor Hub and CNBC + Acorns Invest in You: Ready. Set. Grow. |
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