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Five Ways to Stay Out of Debt

It’s easy to get into debt. However, getting out of it is much more difficult. Given the increase in student loans and rising costs of living, more people find it challenging to keep up with all of their bills while paying down their loans. 

For most people, it’s best to focus on one debt at a time to make their progress toward becoming debt-free feel more tangible. The good news is that debt collectors cannot arrest you for civil debts such as student loans, unpaid credit card bills, utility bills, or medical bills. However, in some states, overdue taxes or not paying child support can lead to legal problems. If you find yourself in such a situation and get arrested, you do not have to stay in jail.

A judge determines how much money or bail it will cost you to get out of jail while you await court proceedings. The amount of bail is determined by a judge based on the degree of flight risk, criminal history, and the severity of the crime. Bail bond agents are professionals who understand the bail bond process and can answer your questions about potential issues. They will also pay the bail amount on your behalf if you are unable to do so. So, be sure to use any money you have to pay your taxes and child support obligations first to avoid putting yourself in legal jeopardy. 

After you pay off all your debts, what can you do to stay that way and keep your head above water?

1. Avoid Credit Cards

Credit card debt is the easiest way to get in over your head. It is too easy to swipe your card to make purchases. Over time, your bills will add up, and you can find yourself right back in debt again. A good rule of thumb is not to buy anything if you do not have the cash to pay for it.

2. Keep an Emergency Fund

Over 50% of Americans do not have even $500 saved in case of an unexpected expense. Emergencies do not come with warnings. Once you are out of debt, start creating an emergency savings fund by making monthly automatic contributions. The amount you put into your fund will depend upon your income and necessary expenses.  Even a small amount of money will add up over time.

3. Focus on Your Credit Score

When you have paid off all your debt, your credit score will be higher, and you want to keep it that way. Good credit scores help you qualify for low-interest loans and can save you money on insurance premiums, mobile phone plans, and cable subscriptions. To maintain a good credit score, pay down your debt, pay your bills on time, make your scheduled credit card payments, and limit the number of times you apply for new credit.

4. Stick to a Budget

Write down a budget of how much money you bring in monthly as well as unavoidable and necessary bills. Even if you start earning more money, do not look at it as an opportunity to spend all the extra income you make.

Instead, put some of it into your emergency fund or another account that earns interest, such as a CD, government bond, or a high-yield savings account. Of course, you can and should use a little to reward yourself for a job well done.

5. Spend Cautiously

Do not forget what it was like when you were in debt. It is an excellent reminder to help you spend your money wisely. Be frugal and smart about the ways you spend your money. Creating a budget, as suggested above, is a helpful way to remind you not to buy items you cannot afford. 

You can breathe a sigh of relief when you get yourself out of debt. Just be sure to follow the steps above to stay out.

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