3 Strategies I Use to Avoid Debt

Want to stay out of debt? These tactics have worked well for me.

Some people don't mind being in debt. But the idea of paying interest just doesn't sit well with me. In some situations, debt is inevitable. For example, I have a mortgage because, like many people, I purchased a home when it just wasn't an option for me to buy it outright. And I've also financed vehicles with auto loans because, again, that's a very large purchase. But thankfully, I've generally managed to avoid taking on credit card debt, personal loan debt, or other high-interest debt. Here's how.

1. I stick to a budget

It's easy to think budgeting is boring, but mapping out my expenses has helped me avoid going overboard in spending categories through the years. The result? I've stayed away from debt.

If you don't have a budget and therefore no easy way to know where your money goes month after month, you risk having to take on debt. Take a little time to map out a budget outlining your expenses and showing what they cost. That will clue you in to whether you're spending too much in the categories you can control. For example, you may not have wiggle room on an auto loan or rent payment, but you might be able to spend less on entertainment or another category if it helps you avoid debt.

2. I keep a fully loaded emergency fund

Having money in my savings account has helped me avoid debt when surprise bills for things like home or car repairs landed in my lap. If you don't have an emergency fund, it pays to build one so you have a similar cushion, and aren't forced into debt when circumstances align the wrong way.

As a general rule, it's a good idea to have an emergency fund with enough to cover three to six months of living costs. But that's not the sort of sum most of us can sock away overnight. Therefore, don't plan on doing it quickly. Rather, start by adding as much money as you can to your savings, and work your way up over time so you eventually have the safety net you want.

3. I check my credit card balances weekly

Many people don't look at their credit card statements until their bills are due. But I like to check my balances every week. That way, I can see if I've spent too much in a given week, or in a given category.

Say your budget allows for $300 a month in entertainment. If, by the middle of the month, you've spent $250, you know to be careful for the rest of the month to avoid landing in debt. But you may not realize you've spent that $250 unless you check your credit card statements.

Incidentally, checking your card balances weekly can also alert you to fraud. If you catch something suspicious early on, it may be easier to resolve.

Racking up debt generally means losing money through paying interest -- money that could otherwise go into your savings or help you meet other important goals. These strategies have worked well in helping me avoid debt. Give them a try and they may help you steer clear, as well.