Do you splurge? Well, nothing wrong with that, so long as you are careful. You have every right to spend your hard-earned money, but overspending should not lead you to misery and debt. The economic boom has seen salaries rise and lifestyles change with people spending a lot on luxuries. Unfortunately, the economic prosperity has also seen a huge rise in personal debts.
While banks coax you to take loans for every reason, they will not help you when you are in a crisis. Debts wreck you financially as well as emotionally. So spend wisely. One needs to maintain a perfect balance between one's needs and wants to avoid debt trap.
Here follow some tips to avoid the deadly debt trap, but first the danger signals. . .
If your bank balance is not enough to meet your expenses till the end of the month, you are headed for trouble. You may think that you can always save the money later but it is not easy.
You are moving towards a debt trap if you are spending much more than you earn. Though loans and credit cards make you richer temporarily, it brings with itself a huge burden which will lead you to a debt trap.
And now simple, everyday tips to help you avoid debt. Most of you might already know this
Before buying an expensive product, think well, it is a necessity or a luxury? You have to make a clear distinction of things you 'want' and 'need'? Can do live without it? If yes, then avoid buying it just because your friends or relatives have it.
Planning to buy a car? Go for the most economical model. Most often people go by looks. But looks hardly matter after you get used to car. What matters is value for money.
Always think about the incidental costs after you take a decision to buy any expensive item. You may think that buying a car will just involve paying off the loan amount. It comes with lot of other maintenance charges, which you should be geared up to pay.
You may be tempted to buy a lot of things with credit cards. Use credit cards judiciously. One of the easiest ways of getting into a debt trap is through a credit card.
Never pay for daily requirements with credit cards. Once you get addicted, it is very difficult to get out of the credit trap.
Try to pay off the entire amount of outstanding dues within the last date. If you carry forward the dues, by just paying the minimum amount you end up paying a lot more in the long run. Banks charge the highest interest rates for personal loans and credit card dues.
Use credit cards only when you really think you should. Otherwise you end up spending money unnecessarily. Stay within 30% of your credit limit.
Set aside credit cards for a month and see how much money you can save. Resist the temptation to shop just to makeyourself happy. There may be many things you don?t need to spend on right now.
Never spend more than what you can afford to. Try to save atleast 10 per cent of your take home salary.
Always list out your daily expenses. You should know how you are spending your money. Do this for a month. You will surely find a way out to cut down expenses.
You must also check all bills very carefully: at a restaurant, or a shop, or even the bank. Your carelessness and ignorance can make you poorer.
You may dream of a fancy house in a posh locality but if you are going for a home loan, make sure monthly EMIs don't exceed 40-45 per cent of your take home salary. If you are going for car, or any other loan, your EMIs should not exceed more than 10-15 per cent of the take home salary.
Always be practical about spending money. Set aside a certain amount for shopping, household needs, utility payments and extra expenses. Make a budget and stick to it.
Always save a certain amount every month. One way would be to ask the bank to directly set aside a sum as a recurring deposit or any savings plan that suits you. So money will get automatically saved into your account.
Many people have a tendency to impress people by throwing parties and buying expensive gifts. Don't indulge in such activities if you can't afford to. You can cut down huge expenses by meeting up with friends in a garden, organising a small picnic than spending money on huge restaurant bills.
Always keep a contingency fund ready. You never know when an emergency may arise. Borrowing from the bank or anyone else is not a good idea. With interest rates soaring, it is better to keep away from personal loans.
If you do not have ready cash to pay for anything, don't accept offers on credit unless you read the fine print of the offers. Many shops offer good on credit. Make sure you know every detail about the deal.
