You have probably heard from various people in your life to avoid borrowing money whenever possible. The main problem with borrowing money is that you end up paying back your lender a lot more money than you initially borrowed in the first place. In fact, for some loans, you may end up paying nearly twice as much as you borrowed over the course of your loan. This, in effect, is wasted money that you could have spent on other things.
If you think that there is no way to get back in today’s world without borrowing money for the things you want, think again. There are effective steps you can take right now that will provide you financial stability so you do not have to borrow money.
In addition, there are different organisations and government benefits that can help with emergency loans of financial assistance which don’t come with excessive fees and high interest rates.
Set a Budget
Setting a clear and concise budget is the first step to becoming financially stable. If you truly want to get by without borrowing money, you will need to consistently keep track of where your money is going. Without this step, you are more likely to spend money that you do not have available to you.
Pay Off Current Debt
If you currently have any outstanding debt, your next step should be to pay off all of these debts. Tackle one debt at a time, while paying only the minimum balance on all the other debts, and keep at it until it is paid off, and then work on the next debt. You also need to cut up all of your credit cards and make a commitment not to sign up for any more.
Another vital step necessary to prevent you from having to borrow money in the future is to make a list of your long and short-term goals. Think about where you want to be in a three years, five years, and ten years. Make a list of all the goals you have that will help you accomplish the things you want. Now prioritize your list of short-term goals and your list of long-term goals, placing the ones you want to accomplish first on top.
Create a Plan
Next, you need to use the information from your budget to determine how much extra money you have available each month to put towards your financial goals. You also need to look at your list of goals and create a financial plan that will help you achieve each of these goals one by one. Proper investments may help you reach your financial goals at a faster rate. It is a good idea to sit down with a financial counsellor who can explain your financial options and help you determine what financial plan is right for you and your family.
Make a Commitment
It is equally important that you stick to your budget and your goal plan. Anyone can write down a budget and set of goals, but you also have to make a commitment to control your spending and to save money. If you and your family are committed to getting by without borrowing money, then it will be easier to stick to your plan.
Have an Emergency Fund
Before you start putting any money towards your financial plan, you must first set up an emergency savings account. This account should hold enough money to cover your expenses for three to six months. This will help you if you, or your partner, has an injury, illness or another major emergency. This will allow you to have cash readily available and prevent the need to borrow money.
Careful planning can help you live your life debt-free. If you plan early and make smart investments, you can even pay for your home without taking out a mortgage. Best of all, you will not be wasting money on interest payments, but rather everything you spend will be used for things you want.