How to avoid getting into debt despite economic difficulties
With the current economic climate, getting into debt seems inevitable for many people and organizations. Individuals, as well as businesses, face daunting economic challenges that the pandemic has unleashed.
It is important to note that in order not to go into debt, one must cultivate an effective financial management approach.
It involves taking proactive steps to manage money and time to limit debt and reduce financial worries. With the evolution of the economy, if strong and diligent financial efforts are implemented, it is possible to avoid the accumulation of debts.
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Here are some ways to limit debt in the context of the current economic challenges:
1. Set spending limits
- It is easy to get into debt if spending habits are not controlled. The increasing use of technology in the business world has made goods and services easily accessible.
- This means that the purchase of desirable goods and services has been effortless, which plays a major role in increasing expenses.
- So, setting spending limits will let you know how to use your finances. This will help you know what you can afford within your income range.
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2. Evaluate your income and expenses
- Having a good knowledge of what goes in and what it should be used for will allow you to spend your money wisely.
- Analyzing your income and needs will help you develop an appropriate spending strategy that covers your expenses.
- Know the nature and requirements of the expenses you make. When your needs are properly budgeted, the chances of going into debt to pay for unforeseen expenses will be limited.
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3. Contentment is important
- If you want to limit your debts, you need to decipher the important things your income needs to be spent on and stick to them.
- Being satisfied helps you aim for the necessities. It gives you an understanding of your needs and wants, thus limiting how you spend on unnecessary aspirations or desires.
- With today’s challenges, contentment is necessary to exercise control over your finances.
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4. Acquire financial knowledge
- Money management is a skill that needs to be honed to adapt to different economic climates.
- Financial literacy is necessary to make productive use of your finances. It is important to read books on finances or take courses on financial management.
- This habit will help you expand your knowledge of different money management concepts that can be applied to your finances.
5. Be realistic with your expenses
- It is natural to desire things. The company introduces new products and services daily that make people feel like they have to buy the latest products to stay trendy.
- Many people go beyond their means to achieve this desire which ends up accumulating unimaginable debts.
- To avoid going into debt, you need to be realistic with your spending. Analyze the essentials you need and see if you need to cut your budget to stay on track.
6. Get extra gigs
- While spending less doesn’t save you from going into debt, you should try to earn more to meet your needs. Additional income can meet greater financial demands.
- Try to engage in activities that can bring you extra income. This will limit the tendency to accumulate debt to pay your bills.
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seven. Have a savings plan
- One of the ways to limit the risk of indebtedness is to plan for unexpected expenses.
- The current economic situation poses a challenge to individuals and businesses. Many things happen unexpectedly.
- As it is important to have a budget, some urgent needs arise outside of the budget and might surprise you if allowances are not made for such events. Allocate your income to cover your savings plan.
Limiting debt requires a lot of self-discipline. It’s about recognizing and reducing habits that can put you in debt. This means cultivating intentional and planned spending habits, as well as improving earning capacity.