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Bad Debts: How to Avoid Them?

For this post, I am going to share ways to avoid bad debts.

In the recent bad and tight economic situation, I won’t be surprised if more and more wage earners are not able to support their current lifestyle with limited monthly income.

No matter how hard and difficult your situation is, always try to prevent yourself to fall into bad debts.

4 ways to avoid bad debts

I listed below 4 ways to avoid falling into bad debts:

1. Review your current lifeStyle

If you can’t change the figure of your income, then you will have to change your current lifestyle.

Unless you can bring in more money, the easier way is to change your lifestyle to the standard which can be supported by your current income.

I know it’s not easy but always think far ahead.

By changing your lifestyle, you won’t need to borrow cash from others (credit cards, banks, loan sharks, moneylenders, relatives and friends).

It’s much smarter to live on what you have rather than to live on tomorrow’s money.

2. Plan your spending

Budgeting is the right word.

I believe there are a lot of people out there who do not favour the word “budgeting”. But, in good financial practice, no one can run away from budgeting.

Through budgeting, you will have a clear picture of your spending pattern and where your money goes.

Most importantly, it will avoid you to spend more than what you have.

A lot of us have visual budgeting (budgeting in our head).

The best way would be to put down your budget in black and white. You can either write it down in your spending book or list it down in a simple spreadsheet.

Do stick to your budget because it’s meaningless if you have a budget but never bother to take it seriously.

3. Replace credit cards with debit cards

Yes, change from credit cards to debit cards. If you’re someone with a weak financial will and hard to avoid temptations, you will be thankful for this smart move.

The debit card function is almost similar to credit cards.

The main difference is that there’s a limit on your spending. And most importantly, debit cards will definitely not bring debts to you.

At the same time, learn the benefit of credit cards. Only after you can manage your own finances, then you can include a credit card in your financial matter.

4. Avoid taking bad loans

What I meant by bad loans is those loan which does not bring benefits to you such as huge car loan and personal loan or bank overdraft.

It sounds easy to apply and get approval for these bad loans. But, when coming to making repayment, it could bring you sleepless nights.

If you must take a loan, then make sure the payment is within your budget and remember to make the repayment on time.

Final thoughts

Basically, we all know we need to avoid bad debts. But, sometimes we just don’t know where to start or how to do it.

I hope the sharing above on how to avoid bad debts will be beneficial to you.

If you have any other ways to avoid bad debts, do share them with me. Let’s learn to stay away from bad debts.

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