How to Avoid Debt in 2020

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Debit is horrible!

There. We said it. But in this day and age, how do you avoid it?

It’s not an easy thing to do, but there are some simple steps to take to help you avoid debt in 2020. 

  1. Know how much you currently owe.
    Take a look at all of your current debt before the year ends. How much do you owe on your car? Your home? Your credit cards? Your student loans? Your personal loans?

    Knowing how much you currently owe on all of your debt can help put things in perspective. But it only helps if you are constantly aware of how much debt you have. So write it down on a big piece of paper and tape it to your fridge. Put it on a sticky note and wrap it around your credit card. Tattoo it on the back of your hand. Okay, that one might be a bit extreme, but the more aware you are of your debt, the less likely you are to add to it.

  2. Make a plan to pay off the debt with the highest interest first.
    Interest rates are where those lenders get us, time and again. The higher the interest rate, the more you’re actually paying. Rank your debt in order of highest interest rate to lowest, and make a plan to pay off the highest ones first. Even paying at extra $50 per month over your required minimum will help shrink your principal (the amount you borrowed), and will lower the overall amount of interest you pay.

    Just make sure that you’re making regular payments on all of your debt. Don’t just focus on one debt at a time. But any extra money you can spend lowering your principal debt, the better.

  3. Be careful with the holidays.
    Credit card balances have a way of jumping right after the holidays, don’t they? Even with all the sales and discounts available during the holidays, it’s easy to go overboard and increase the amount of debt you accumulate. And if you don’t want to start 2020 in even more debt, make sure you spend carefully during the holidays.

    Set a limit on the maximum you’re comfortable spending on everyone on your list and stick to it. Make a list of all the gifts you want to buy and stick to it. Just create a plan and stick to it. That’s the big thing. If there are too many people in your family, office, or friend-circle to buy for, consider proposing a White Elephant or Secret Santa-type gift exchange to save money and still have fun.

  4. Start paying for things with cash.
    It’s a lot harder to part with cold, hard cash than it is to just swipe your credit or debit card. If you withdraw a set amount of cash each week or month and limit yourself to spending just that amount, you’ll find it a lot easier to curb your unnecessary spending, and limit the amount of credit card debt you build.

    Set recurring payments (streaming subscriptions, rent or mortgage payments, utility bills) to your credit card or bank account, and then pay for everything else (groceries, dining out, entertainment, shopping) with cash. The first few times you run out of cash before the end of the week will show you just how much money you’re really spending each week.

  5. Create a budget.
    It wouldn’t be a debt article without at least one mention of creating a budget. And luckily, there’s always at least one person in every family or office who just loves making budgets and spreadsheets who would be more than happy to help you plan out your 2020 finances. Now is the time to ask for their help.

    With a budget, you’ll know how much money you can spend without accruing more debt, how quickly you can pay off your existing debt, and how much you can save for the future. It could help you create an emergency fund to cover unexpected expenses (like medical bills or car repairs) that put a lot of people in sudden debt that takes them years to dig out from.

  6. Remind yourself constantly about your debt.
    All of these tips will help you pay down your existing debt and avoid accruing new debt, but only if you stick to them for all of 2020 — and beyond. It’s so easy to assume that, just because you’re paying the minimum balance, that you’re on top of your debt. This is especially problematic with credit cards, which often have the highest interest rates.

    So remind yourself regularly to check the status of your debt, your spending, and your savings. Set a reminder on your phone to check your finances every month. Make a recurring meeting on your calendar to review your spending every two weeks. Schedule an alarm to go off every week to check your debt. Whatever it takes to make it a habit, do it. And do it regularly. 

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