Debt Prevention

Debt includes monies owed to creditors and lenders. Buying a house or car often involves getting a loan due to the expensive nature of these items. Maintaining a good credit score calls for managing debt well. You can reduce your debt and prevent debt on credit cards with a few simple tips.

Budgeting

Budgeting is key to preventing debt. Balances on credit cards increase when consumers use their cards to make everyday purchases. Credit cards are helpful in emergencies but they shouldn't be used to fulfill every desire. Plan out a monthly budget and decide how much to spend on items outside recurring expenses. Going over budget and spending too much on shopping, dining out and recreation can take money away from bills, thereby creating the temptation to use a credit card to meet basic needs.

Managing New Charges

There are good reasons to use a credit card, such as paying for an emergency car repair or medical bills. But when balances stay on a credit card for several months, interest incurs and it becomes difficult to pay down the debt. Resolving to pay off new charges each month helps prevent debt. If you can't pay off the balance completely, devise a payment plan to do so within the next few months.

Emergency Savings

Having a cash emergency savings is another effective method to preventing debt. With cash in your savings account, you can withdraw funds to meet emergency expenses so you don't have to rely on credit cards. Saving money can prove challenging, especially if you don't have a lot of disposable income. Start small and resolve to deposit a percentage of your pay into a savings account -- perhaps 10 percent. Rather than spend tax return money or work bonuses, put this cash into savings and save it for a rainy day.

Avoid Temptation

Credit card companies often solicit new business by sending preapproved credit card offers in the mail. And retail cashiers may ask you to complete a credit card application to save on the purchase. Decline such offers for credit cards. The more credit cards in your possession, the more likely you are to use them. Also, leave your credit cards at home and carry cash to reduce and prevent new debt.