8 Ways To Avoid Debt 

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No one consciously tries to get into debt. Once you are in it, you might feel like it is beyond your scope of control. Getting out of debt and staying debt-free is possible, provided you become conscious of your finances. By adopting a proactive approach, you can overcome the urge to splurge on short-term whims and instead, focus on long-term financial health. Learning how to avoid debts in life is perfectly doable. 

Here are some simple and practical steps to avoid debt


Start Budgeting 

You cannot become proactive without planning. Making and following a budget is one of the most effective ways to avoid debt. Make a list of all your monthly expenses and allocate a certain portion of your earnings to them. 

A general norm is to allocate 50% of your income for essential expenses such as food, utilities, transportation, housing, and such, about 30% of luxuries such as eating out, holidays, and such and the rest for savings. A budget will make you conscious of all the different necessary and unnecessary expenses you incur every month. 


Use an Expense Tracker 

It is not just about creating a budget you must follow it as well. The simplest way to do this is by using an expense tracker. Overspending will quickly land you neck-deep in debt. An expense tracker is an application or software that keeps track of your money inflow and outflow. You can use it to keep track of your daily expenses so you know how much you spend and where. 

These days there are plenty of online apps to track your daily expenses. You can even make your own expense trackers using spreadsheets, customised as per your requirements. When you know where your money goes, curtailing certain expenses becomes easier. 


Plan Big-Ticket Expenses 

You should always plan for big-ticket expenses. As the name suggests, these are significantly bigger expenses than the usual ones. Whether you’re purchasing a home appliance, the latest electronic gadgets, or making reservations for a holiday, planning is crucial. If not, you might overspend or use funds you don’t have. 

A significant expense can quickly throw your monthly budget out of balance. A practical solution is to use a staggered payment option such as Pay- in- 3 by Simpl. It helps divide big purchases into three equal instalments for easy repayment and convenience. This helps stick to a budget while curbing any scope of overspending. 


Cashbacks and Coupons Help 

Most frown upon the thought of using coupons while others are unaware of the benefits of cashback. Cashback is a small percentage of some spent on a purchase refunded to your account. 

It might not seem like much, but it adds up in the long run. So choose merchants and payment platforms that offer them. For instance, Simpl offers exciting cashback on a variety of merchant sites such as Dunzo, Rapido, BigBasket, and so on. 

If you spend Rs. 2000 with a 15% cashback, Rs.300 will be credited to your Simpl account. Similarly, even coupons help reduce the total bill payable. For instance, a coupon that reduces your dining out or grocery bill by 10% per month adds up to a decent sum over a period. After all, money saved is money earned!  


Deal With Credit Balances 

Not regulating your spending will increase your debt sooner or later. To avoid this, you need to deal with credit balances. Whether it is a monthly instalment on a loan or credit card bill, ensure you pay the bills on time and in full. It is recommended to repay the credit balances before focusing on other expenses. 

Even if a credit card bill doesn’t seem like much, the interest paid on it adds up to a significant amount over a period. If you cannot afford to purchase without a credit card, then you cannot afford it. This is a simple rule that will make you conscious of your expenses. 


Increase Earnings 

Increase your earnings to reduce the load of expenses and to avoid debt. To do this, consider creating alternative streams of income. These days, if you have a skill, chances are someone needs it. The Internet has connected everyone and transformed the world into a global village. 

Hence, consider part-time virtual options such as content writing, starting a YouTube channel, creating an online course, or even becoming a virtual assistant.

Make a list of your skills, talents, and passions, and look for means to leverage them to earn more. That said, earning more doesn’t mean spending more. If you do this, it defeats the purpose altogether. You can increase your savings, investments and accelerate debt repayments with the additional income. 


Save More 

If your earnings increase for one reason or another, don’t give in to the temptation of spending it all. Instead, live like you were living. It means, live off the lower earnings that you had before the extra money started flowing. The extra funds can be used for savings. If you have managed to live so far on the income you had, you can keep doing so in the future too. 

The additional funds can be placed such that they work for you. Whether you decide to invest in the stock market, mutual funds or leave it in a recurring deposit account, the choices are endless. By making the money work for you, your earnings will further increase. 


Create an Emergency Fund 

An important part of improving your financial health and avoiding debt is to create an emergency fund. An emergency fund refers to savings reserved for “just-in-case,” situations. Even if life is unpredictable, your ability to withstand emergencies and dire situations becomes easier with planning. 

Whether it is an accident that renders you immobile for a few months or salary reduction, these unplanned circumstances can quickly destroy your financial standing. Set aside an amount such that it can cater to your needs for at least six months. You need not create an emergency fund at once. Instead, allocate about 5-10% of your monthly earnings to it.

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