With financial futures more uncertain now than ever before, keeping your family out of debt is becoming a priority for many families. Unfortunately, with rising costs, and diminishing working capital, it’s becoming quite a challenge for many families. These are a few steps you can take that will help you stay on the straight and narrow – financially speaking – so that you can avoid the many pitfalls debt creates.
Create a Workable Budget
Some people have the idea that budgets are made to be broken. That is simply not the case. A budget is meant to serve as a financial guideline to help you accomplish your financial goals. In order to be effective, a budget needs to be three things.
If you don’t have a realistic budget, you’ll never enjoy the benefits a solid budget stands to offer. The budget must be something you can achieve consistently in order to work for your needs and those of your family. Otherwise you’re spinning your wheels and not really accomplishing anything.
Finally, the budget needs to be one you can stick too for long periods of time. Most people have budgeting goals. For some it is paying off certain bills. Others seeks to make large purchases or go on vacation. Others might even be interested in philanthropic pursuits and creating a budget to funnel funds into those endeavours. Whatever your goals may be, starting with these three basic principles of goal creation will help you accomplish your goals faster.
Save to Invest
The very best way to avoid debt is to boost your income. While not everyone is in a position to go out and get a second job, saving to invest is a way to grow your money slowly over time. Big investments, the kind that have the potential to pay off bigger, better, faster, and more, take time to cultivate and receive a profit on. Microlending and investing might be a better choice for families looking to avoid debt by building wealth. These small investments make it possible for anyone to invest. Some investment of this nature begin as low as $25, making it possible for cash strapped families to make good on their investments and earn their ways out of debt.
Avoid Bad Debt
Bad debt consists of debts that do not build value over time. This type of debt is fairly common in consumer drive societies, but should be avoided whenever possible. This is especially true for anyone interested in avoiding debt completely.
Bad debt involves items that depreciate in value and often carries absurdly high interest rates when the time to repay the debt rolls around.
The best way to avoid bad debt is to save up for purchases of consumer electronics, clothing, and even automobiles. By saving ahead of time you can avoid the sticker shock of interest bearing price tags on these purchases by saving you a great deal of money over the life of your purchases.
The key takeaway here is that not all debt is bad. While you may be working hard to keep your family out of debt, some debts are good to have. A good credit history can help you build a positive credit history with lenders. Using only good credit investments, you can gain the trust of lenders resulting in lower interest rates when the time comes that loans are necessary.
Understand the Benefits of Good Debt
It would be nice to go throughout life without ever needing to go into debt. However investing in good debts, like an education, a home for your family, or even a business, can pave the way for greater financial success in the future. Those are good debts that are likely to build value of their own over time.
Live Within Your Means
The most important thing you can learn to do today to avoid getting your family into debt and keeping them out of it for the long haul is to teach your family the importance of living within your means. You don’t need status symbol cars, vacations, or mobile phones to impress your friends and family. If you do, perhaps it’s time to move on anyway.
Set your budget. Live within your budget. Don’t use credit for things you can save a little while to buy. The concepts are simple, but the results they deliver can change lives and will help to keep families of all shapes and sizes from going into debt.
If you still have concerns about staying out of debt, contact Mark Rotstein to learn about steps you can take to build a better financial future for your entire family.