4 Financial Tips to Avoid Accumulating Debt

Accumulating debt is an unfortunate—yet sometimes unavoidable—part of one’s life. It can be incurred for a multitude of reasons, but the goal is to always keep it on the manageable side. Without proper foresight and money managing, however, drowning in debt is a significant risk to think about.

In order to stay above the pressure of finances, following the advice of Debt Helpers can go a long way. Sticking to the basics, such as keeping track of cash flow and avoiding overspending habits, can provide some relief. 

In order to help with this regard, keep in mind these four financial tips in order to avoid accumulating too much debt.

View financial information in its entirety

The first step to financial health is to view financial information in its entirety. A lot of people only list down their cash flow as it occurs—while this is one way of doing it, that’s definitely not the most effective route. By taking note of any recurring expenses and future expenditures, one can more or less estimate their personal money flow for the coming months.

This piece of information is incredibly crucial for an effective money-saving strategy. If it is impossible to track finances or the burden of debt is too much, then seeking the advice of a financial advisor or a debt helper can be helpful.

Create a budget plan

After one’s financial status has been evaluated, they can start creating a budget plan to get out of debt or to simply save more money. By balancing monthly income with recurring expenses, one can come up with a rough estimate of the amount of money that needs to be spread out. 

Regardless of the amount, it’s best to spread the surplus between investments, savings, and pocket money. The default ratio to consider is 70%, 20%, and 10%. This way, the majority of the money goes towards a passive income, while a small portion remains available for easy access.

Create an emergency fund

One of the best ways to avoid falling into debt is to create an emergency fund. An emergency fund is a budget set aside that can act as a monetary buffer in case of an emergency. There are two ways to start an emergency fund, either as an accumulation or as a maintained balance.

Accumulation means setting aside a portion of income and continually adding it into the fund, thus allowing it to continually grow over time. Maintaining a balance, on the other hand, means storing a specified amount and ensuring that it never goes below that point, adding money whenever a portion of the fund is liquidated.

The general rule of thumb is to save around three to six months’ worth of expenses in the fund. This way, almost any emergency can be resolved with the stocked money—for as long as one commits to replenishing it when needed.

Consult with a specialist

The best way to avoid accumulating debt is to seek the help of a specialist. Financial advisors are capable of seeing the bigger picture and determining the best way to save money in the long run and avoid debt. In cases where one is already steeped in debt, these professionals can restructure their finances to avoid drowning in it while getting to pay it off bit-by-bit.

Conclusion

The burden of debt can be heavy and take a toll on one’s quality of life. This is why so many people find it necessary to chip away at their financial liabilities so they can live debt-free. While it may be possible for one to improve their financial standing on their own, the best option in extreme cases is to approach a certified debt relief service. 

At DebtHelpers.ca, Canadian clients are provided with customized debt relief and solutions. Get in touch and schedule a free consultation with one of the accredited specialists.