Nobody enjoys owing somebody else money. Be it family or friends, a bank or a loan company, owing a debt can feel like a looming impending doom; like a monster lurking around every corner or a dark cloud raining constantly on your mind. There are numerous reasons that we may have to borrow money.
Everything from getting a higher education, to starting a business, to ending up with unexpected car repair bills due to an accident or mere chance are just a handful of the myriad ways in which we find ourselves needing extra cash as soon as possible. While debt is entirely too easy to slide into (here’s looking at you, credit cards), it can also be simple to avoid.
Build a Budget
Building a budget is one of the top ways to manage spending and keep aware of how much money you are making on an annual basis. Having that knowledge makes it easier to make any financial decision that you may come across. While creating a budget can seem like a daunting and tedious task, there is a general outline for budget building, called the 50/30/20 method, that acts as a guideline for anyone from novices to budgeting experts. The 50/30/20 method requires you to look at your average annual income after taxes and then assign fifty percent of that income to any necessities you may have. This might include food, car insurance, medical aid, and the like. You are then to assign thirty percent of your income after taxes to your wants. Wants can range anywhere from leisure activities to vacations.
The remaining twenty percent of your income after taxes goes towards savings and paying off any debts. This outline holds you accountable to keeping track of your spending, as well as helping to pay attention to your debts and savings accounts.
Choose Your Loan with Care
While loans often feel like “free money” when we get them, it is a completely opposite story when we have a look at a loan payment bill. When choosing a loan, it is important to do your research. Look up what type of loan will be best for you. Starting a new business? Are you remodeling your home? Are you going to school?
There are numerous types of loans offered by multiple institutions, such as government, banks, and lending companies. Once you know what type of loan fits your needs, researching the different institutions offering that loan type will let you compare interest rates, origin fees, and other various fees that may be attached. This article here lists tips and tricks when it comes to choosing your loan. Always aim for a loan that is well within your means of paying back.
Create a Debt Repayment Plan
Once you have your loan, set up a repayment plan either with yourself or the institution to ensure that you are paying the amounts required, or more, in a timely manner. Some institutions may offer a plan that takes out the required amount from your checking account on a monthly basis. This helps to keep interest rates at their lowest and gives you the peace of mind of paying your loan without issue.