Borrowing money represents an issue that millions of people from all around the world deal with on a daily basis. While it is not technically bad, because after all, everyone runs into financial issues from time to time, doing it consistently can have numerous bad effects on the life of a person. With this in mind, it is important to avoid making the concept of borrowing money a habit, thus needing to live pay check by pay check.
In this article, we will outline some of the best tips that can be used in order to stop borrowing money on a constant basis, and rather once it is truly needed. Before anything else, it is important to point out the fact that there are numerous ways through people can get access to loans, including personal loans, mortgage loans, payday loans etc. There are several differences between these types of loan, and each can have a different effect on the life of the person taking the debt. Based on this, once you have realized that borrowing is a problem, you should think of ways that you can better budget, in order to avoid running out of money so often, while also paying off the already-existing debt, and increasing your credit score, thus granting you access to bigger loans in the future, whenever they’ll be needed.
Without further ado, here are the main tips that you should consider to stop borrowing money:
1. Get rid of your credit cards
Most people have a couple of credit cards, with different overdraft amounts. Getting rid of them represents the first step towards borrowing less, considering the fact that getting a loan automatically becomes more difficult. Not only this, but constantly maxing out your credit card also has the potential of worsening your credit score, which many people do not want. However, it is recommended that you keep at least one credit card as a source of emergency funds, in case you are ever in need of them.
Before giving up your credit cards, it is important to try your best in order to cover all the existing debt. This should be the main priority before starting to borrow less. There are numerous strategies to go about this, but the first, and most important one, is to reduce your monthly spending habits. This can be done in numerous ways, such as lowering your utility bills by consuming less, using public transportation, buying less expensive foods, considering the idea of cooking at home, and giving up other habits that cost money for a period of time. By doing so, you’ll be able to save a bit more money, which can then be used in order to cover the pre-existing debt that you’re stuck with.
2. Try your best to find higher sources of income
Most of the times, people who tend to borrow a lot, do not try looking for higher sources of income. With this in mind, their spending habits remain the same, while still taking an insufficient salary, which is bad news, and won’t pull you out of your debt. Trying to work multiple jobs, or even doing what you like most can both allow you to get more money, but also achieve new hobbies that you will enjoy later in life.
3. Calculating the amount of money that you’re spending as interest
Interest can often put people deeper into debt, considering the increasing rates of interest on personal loans, and mortgage loans as well. Therefore, if you’re trying to get rid of your borrowing habit, it may be best to reconsider every penny that is being spent on interest. With this in mind, simply go ahead and calculate the exact sum that you’re paying as interest on a monthly basis, and look for inconsistencies. If they are present, try getting in contact with your bank, to have the issues fix, or even call them up to negotiate for a lower interest fee, which can definitely increase your life quality, if offered.
4. Consider only getting payday loans
During the last couple of years, payday loans have become increasingly more popular, due to the fact that they represent a fast source for emergency funds, whenever they are needed, which need to be paid back once you get your next pay check, normally in a couple of days or weeks. These loans are small in size, and are only meant for people to deal with financial emergencies that were not foreseen, thus making them a great advantage to anyone struggling with money on a monthly basis. Don’t make getting payday loans a habit though, as this can pull you right back into the same cycle of living pay check by pay check, and struggling to save up money.