Total U.S. household debt hit $14.15 trillion in the fourth quarter of 2019. Based on a population of nearly 330 million, the average owed per person (including infants and children) is a startling $42,879. Many households struggle to get their debt under control. They may have issues making payments and get stuck living paycheck to paycheck. Making their savings goals a reality may seem impossible, leaving them scared and frustrated. If you want to live your best life, developing a financial strategy that keeps you out of debt is a must. If you don’t know where to begin, here are some tips.

Make and Follow a Budget

Having a clear, defined budget is critical if you want to avoid debt. It allows you to outline your expenses and gives you a way to set spending limits. Plus, you can allocate a certain amount to savings, which is a critical part of staying out of debt.

If you don’t have a budget, create one immediately. Tally up your income, list all of your debt payments and living expenses, and add a line item for saving. See how much you have available after covering those necessities.

If your income falls short, you may need to explore ways to cut back. If you have a surplus, then consider how it can be best used. You could bolster your savings, pay down debt, or otherwise find ways to ensure your financial well-being.

Get an Emergency Fund

A buffer is critical if you want to avoid debt. Without an emergency fund, you might have to turn to credit cards or loans to handle the unexpected. That isn’t ideal.

Begin by socking away at least $1,000. Usually, that amount is enough to cover home or auto deductibles, for a start. It can also handle many smaller emergencies, like a flat tire, trip to the doctor, or major appliance failure. You’ll have a safety net that you can use for those costs and replenish much more quickly and easily than if you were repaying a similarly sized debt.

Once you have at least $1,000, you may want to shift your attention to paying down high-interest debt, if you have any. After you square that away, work to stash three to six months of living expenses. Usually, that’s a sufficient enough cushion to weather even a severe financial storm.

Consider Going the Cash-Only Route

One of the benefits of using cash is overspending isn’t an option. The money in your pocket, purse, or wallet is all you have available. Once it’s gone, you can’t spend any more.

The cash-only route allows you to ensure you stick to your budget. You can pull out cash for each of your spending categories, like groceries or gas for your car. Next, place that money in envelopes designated for each purpose. When you make an associated purchase, use cash from the corresponding envelope.

Using cash can make your spending feel more real, essentially increasing your awareness of what you’re handing over and what you’ll have left. You might make smarter choices, as a result, and that can make a big difference long-term.

Plan Ahead for Large Expenses

Your emergency fund can become a sizeable cash stash, so it may be tempting to use that money for large expenses. But that isn’t the purpose of an emergency fund. It’s there to handle the unexpected, not what you know is on the horizon.

Whether you want a new television, will need to replace your roof, or intend to buy a car, make the cost part of your financial plan. You may want to create dedicated savings accounts for each one. That way, you can deposit into them regularly and build up the amount you need.

This approach essentially supports a broader cash-only lifestyle. Avoid making the purchase until you have the full amount, ensuring you don’t need debt to cover the cost. At a minimum, if an expense genuinely can’t wait, you can use what you do have stashed to lower how much you need to cover with debt. That can reduce your long-term financial obligation, making it easier to rid yourself of that debt as quickly as possible.


Do you have tips for developing a financial strategy that can help people stay out of debt? Share them in the comments below.


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