Evaluating your current situation can help prevent future debt.
Life happens, and as it happens you take on expenses and bills you didn’t or couldn’t plan for. Hundreds of people go into debt each day. Whether it’s something as small as a minor credit card purchase to taking out a mortgage to buy a home, debt is a major part of our culture.
Despite it being common practice, getting into debt should be avoided when possible. You must ask yourself important questions after getting into debt to understand how you ended up in your current situation, and how you can avoid debt in the future.
Whether you’re looking to take out a credit card or borrow from a lender here are four things to consider when you’re about to go into debt.
How did you get here?
It’s important to understand how you got into your current financial situation to avoid getting into debt in the future. Did you spend over budget? Why did you go over budget? Was there anything more you could have done or done differently to avoid getting into debt? Understanding why you had to borrow money can help you avoid it in the future.
What’s wrong with your budget?
If you went over budget, is there something wrong with the way you created your budget? Did you create your budget during an unusually low spending period? If you spent over budget due to emergency expenses, create room in your budget for unexpected expenses. However, if you went over budget because you miscalculated the cost of usual expenses, you’ll need to rework your budget to match what you actually spend or make cuts to afford your monthly expenses.
Could you have built an emergency fund?
An emergency fund can bail you out when you’re faced with emergency expenses. Saving money is challenging for anyone living paycheck to paycheck but making it a priority can prevent you from getting into debt. Putting away even the smallest bit of cash each month can help you build enough of a fund to cover unexpected expenses.
Did you have other options?
Getting into debt is often the first solution people seek when they’re short on cash, but were there other things you could have done to avoid debt? Could you have borrowed money from a friend or family member? Borrowing money can cause issues between friends and family, but many people have caring friends and family who would be willing to help if they could.
Did you ask your employer for an advance? In some cases, employers will pay employees in advance to help them out of a bind. Could you have gotten side work? You may have been able to cover emergency expenses with a side hustle like these.
There aren’t always alternatives, and you may have no choice but to go into debt. When that happens, small loans are available for borrowers in a bind. However, learn from money mistakes and make changes to avoid getting into debt in the future.
This post is not intended to be a solicitation for a loan. Pomo One Marketing, Inc. provides these blogs for entertainment and informational purposes only. Remember to consider all your financial options before making any decisions related to credit.