The world around us has become highly commercialized and with all kinds of tempting offers it's not easy to avoid credit card debt. Credit cards charge a very high annual interest rate that can adversely affect your financial position and deplete your assets at an exponential pace. Hence, a sound financial planner would advice you to avoid credit card debt at all costs.

A discipline in financial budgeting helps us to attain the required degree of financial freedom necessary to avoid succumbing to debt. In other words, creating a customized budget is important to effectively manage our finances and stay out of debt. Of course planning the budget isn't enough. We must have a lifestyle that is in compliance with our planned budget.

When planning a budget, in addition to keeping aside funds to make the necessary purchases we must also make a provision for emergencies. Making provisions for the rainy days will save us from unnecessary debts and tax burdens. On the other hand, not factoring in the unforeseen expenses in advance can have dire financial implications and may even lead to bankruptcy in the worst cases.

Another effective way to avoid unnecessary debt is the intelligent use of your credit cards. It's a wise practice to maintain your credit card expenses below the credit limit and make the payments within the grace period. The grace period is the time allowed by the credit card companies to make the outstanding payments without being charged any interest. This can protect us from accruing debts. To adopt this strategy, you must use your credit card only when you are sure to have the necessary funds available for repayment within the grace period, which is usually forty-five days for most companies.

Exercising a degree of caution towards the kind of expenses you incur on your credit card can also prevent you from falling into the debt trap. Do not use your credit card to invest in property, expensive furniture or cars. Such assets are worth investing into only if you have the liquidity to buy them. Using credit card to pay for them can put excessive debt burden due to the compounding interest rates.

To summarize, creating a budget that complements your lifestyle and sticking to it are important steps in staying debt free. Knowing your limits and not going overboard with your expenses also goes a long way in managing and controlling your finances better and eliminating credit card debt.


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