Even
among people with the lowest credit scores, the credit card is coming back yet
again. During the second quarter of 2016, the total household debt ballooned to
$12.5 trillion, as per the quarterly report by New York Fed. This increase was
driven only by credit cards and auto loans. Auto loan debt has been rising
since the past 6 years but the soaring credit card balances have been a recent
development. Post recession, households curbed their usage of credit cards till
2014. However, since then card balances have increased by around $70 billion.
Credit
cards are more of a necessary evil.
They are extremely necessary tools in our modern life but at the same time, they are the root of all financial problems. If people use cards moderately, this can lead to smooth consumption but when your usage goes out of control, you might fall in trouble. Here are some steps that you may take to stay out of debt.
They are extremely necessary tools in our modern life but at the same time, they are the root of all financial problems. If people use cards moderately, this can lead to smooth consumption but when your usage goes out of control, you might fall in trouble. Here are some steps that you may take to stay out of debt.
- Create a list of debts: The foremost step that you can take is to create a list of all debts that you owe. Include the name, the present outstanding balance, monthly installment and the interest rates. Start off with the debt which carries the highest rate as that will make you debt free sooner.
- Check your monetary allocations: While creating a spending plan for a month, make sure you create an envelope spending account for every single debt that is there on your list. Once you pay off the first debt, make an adjustment by adding the monthly allocation for that debt so that you can again tackle your next priority debt.
- Follow a strict budget: Once you know the importance of managing your funds, you need to start following a strict budget which doesn’t allow you to spend on things which you don’t need. Always think of your savings so that you don’t ever cross that limit and then fall in trouble.
- Stay away from impulsive buying: If you had a habit of impulsive shopping, you should immediately put a stop on it. Nothing can push you to debt more than impulsive buying. Don’t take to buying anything that pleases your eyes. Debt always has a detrimental impact on your financial lives and hence the sooner you get rid of debt, the better it is for you. If possible, get help of professional debt relief options as they can always assist you in a systematic way.