Avoid the Debt Cycle
Accidents, emergencies, and other unforeseen circumstances can lead to financial stress. If you find yourself struggling financially, borrowing money might be a good short term solution. However, for long term financial issues, a short term loan is only a quick fix, like a bandage for a broken arm. If you find yourself trapped in the cycle of debt, there are a few ways to get out. Below are some helpful strategies to help you avoid this debt cycle:
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- Seek financial counseling from a professional financial counselor or even a friend or family member who knows how to handle their finances. Don’t expect short term financial help, but instead learn from them how you can change your financial situation.
- When you get paid, spend your money on necessities first - rent, utilities, food, etc. Don’t buy a new pair of shoes just because you want them.
- Pay off existing debts before taking on additional debts. If you have an existing short term loan, pay it off before getting another.
- Don’t borrow money to pay existing debts. If you have an outstanding cash advance or are carrying credit card debt, it is unwise to borrow more money.
- Don’t make a habit out of taking out loans, but try to avoid debt. Borrowing money should be the exception, not the rule.
- If you are currently in debt, try to negotiate a monthly payment plan before taking out a loan.
- Open up a savings account and add money to it every time you get paid, even if you only deposit $10 each month. If your money is in the bank, it makes it harder to spend.
- Set financial goals and make plans to achieve them. This could include learning how to make and follow a budget.