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Top Four Ways to Avoid Consumer Debt

Consumer debt is unfortunately a problem that many people suffer from. The most common forms of consumer debt include the debts from credit cards and from payday loans. If you feel as though you may be falling into consumer debt, there are ways to avoid it and achieve debt relief.

Monitor Your Spending Habits

When the end of the month arrives and you look at your credit card bill, are you ever shocked to find a bunch of small purchases listed… adding up to a large bill? Paying for items with a credit card seems to be quite convenient, but can be dangerous for your debt.

For one month, keep track of each expense you make. Keep a notepad or sheet of paper in your wallet, and each time you make a transaction, write down the following: date, object purchased, and total amount. At the end of the month, categorize your purchases into groceries, clothing, medical, and other categories. The main category you want to look at is your “other” category. You may be surprised at the portion of your credit card bill being dedicated to numerous random purchases. By monitoring your spending habits, you can help keep yourself out of debt.

Pay in Full and On Time

Another key way to avoid consumer debt is to be sure you pay your entire payments on time. If you cannot afford the entire bill, try to pay slightly more than the minimum payment. The more you pay off on your credit cards, the less you will end up paying in interest. With the high interest rates credit cards charge, it is wise to find a way to stop debt by paying off your credit cards via debt consolidation.

To help keep payments on time, make a note on your calendar for each time that particular cycle ends. This way you can be prepared to make your payments on that day. If you pay off your bills online or write the check for them on the day the billing period ends, you will not run the risk of sending in the payment late. This type of debt management will help you keep track of when your payments are so you do not fall further behind.

Imagine Your Credit Card as Cash

Credit cards can have the ability to make you feel as though you have all the money in the world. When you pay with cash, you can see the number of bills dwindle in your wallet, but you always see your shiny plastic cards in their holders. A key to avoiding consumer debt is to imagine your credit card being cash. Do not be fooled with the $2,500 limit on each card. If you do not have the cash to back up the card, you should reconsider making the purchase.

Watch your Debt-to-Income Ratio

Your debt-to-income ratio is the percentage of your monthly gross income that goes toward paying debts. This simple calculation can help you determine if you have too much debt. To calculate your ratio, divide your total monthly debt payments by your total monthly income. A good debt-to-income ratio is typically 36% or lower. If it is 40% or higher, then you may need help with your consumer debt situation.

If You are Already Suffering from Consumer Debt

If you are already trapped in consumer debt, there are ways to achieve debt reduction. In addition to budgeting your money wisely and tracking your spending habits, you can use debt settlement as a type of debt relief. This will allow you to negotiate with the credit card companies and lower the total amount that you owe. If you are unable to afford the minimum monthly payments, you may want to look into this option. Another option for you is to go through debt reduction, which consists of negotiating with the creditor and convincing them to accept a lump sum settlement in exchange for the debt.

There are effective ways to get out consumer debt if you focus on changing your ways and your spending habits. By keeping track of your spending and keeping an eye on your debt, you will be able to manage your money and find your way out of consumer debt.

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