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The Best Ways to Avoid Excessive Debt
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Caitlin
Student Contributor
Posted September 29, 2016
Create a budget
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Having a budget you actively stick to can help you avoid excessive debt. When creating your budget, decide how much you’re going to spend on flexible expenses (e.g. meals out, clothes, coffee, etc.) using your credit card. Your budget should be a combination of your fixed expenses (e.g. rent, utilities, groceries, gas) and your flexible expenses. The total should be less than or equal to the amount you earn in a month. While seemingly common sense, credit cards tend to give the false perception of freedom with spending. Spending less than you make will ensure that you don’t carry a balance each month on your credit card, enabling you to make full payments on time.
 
If you don’t have the cash for it, don’t buy it
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There are circumstances where you might use your credit card for something that you can’t afford, such as an auto repair or a new kitchen appliance. In those instances, pay what you owe as soon as possible. A bad habit to get into is using your credit card for smaller purchases when you don’t have the cash to pay for it. If you’re going to use your credit card for the little things, make sure you have the money to pay it off immediately. Paying off your credit card early or on time ensures that you won’t be charged any fees or interest.
 
Pay down any debt that you have—fast
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Instead of using your credit card for a month, try putting any extra money toward paying down the debt you already have. Focus on paying off your smaller debts aggressively, paying more than the minimum balance first. Then, work your way up to paying off the larger balances. This strategy builds confidence in your ability to pay down and get rid of debt. While paying your smaller debts aggressively, make sure to pay at least the minimum on your larger debts to avoid missed payments. Use your personalized budget to help you determine what will be the best plan of action for quickly paying down your debt.
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