How to Avoid Excessive Debit

Developing a reasonable budget and sticking with it is one of the best ways to avoid excessive debt, according to the Federal Trade Commission. People who buy on impulse and live paycheck to paycheck risk building excessive debt. An unexpected major repair, job loss or illness can lead to overspending on credit cards and a mountain of debt that could lead to bankruptcy. Spending conservatively while saving as much money as possible helps avoid financial problems.

Instructions

1

Avoid paying for purchases with cash or debit cards whenever possible. Paying with cash helps avoid impulse buying brought on by easy availability to credit. Carry one credit card with a low balance for emergencies while leaving others at home.

2

Carry low balances on all revolving credit. Ideally, pay off all credit cards at the end of each month, or if you carry a balance, make sure it is no more than about 10 percent of the credit limit on each respective account. That means your balance should never exceed $300 on a credit card with a $3,000 credit limit.

3

Put down large down payments on big-ticket items such as a new home or automobile. If possible, pay more than standard 20 percent down on a new home purchase. Pay as much down as possible on a new car, or ideally, purchased a used car for cash.

4

Make biweekly payments, if possible, on installment loans, car payments and even mortgages. Biweekly payments help pay down debt faster because you'll make 26 payments over the course of the year while paying biweekly, as compared to 12 with monthly payments.

5

Save regularly while keeping three to six months' take-home pay in the bank at all times. This can help you avoid having to borrow money in the first few months after a job loss.