I settled my debts. How not to get in debt again?

by Erik Vogt

If you are reading this text it is because you may have already tangled up with the bills and know how hard it is to get into debt. The collection calls at any time of day, the difficulty of getting credit in the square and finally such an unpleasant feeling that makes you swear to your feet together that you’ll never fall for it again! But, behold, you settle your debts, and after a few months the finances are no longer there. Sounds familiar? Learn how not to get in debt again.

For those who answered yes, do not feel guilty. Instead, think that if you got into debt before, it’s because something went wrong with your financial planning. So the time is to roll up your sleeves, plan yourself, and figure out what you can do to close your accounts this time. Here are 5 tips that will help you stay out of debt again.

1. Know how much you earn and how much you spend not getting in debt

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It’s not a matter of being good or not in math. For most people, one of the biggest challenges in finance is understanding how small coffee spending turns into meaningful spending at the end of the month, or how the salary you were supposed to give for the whole month was cut short by the 15th.

To come up with an answer, there’s no way: you have to record your income and expenses. If you have never done this before, our tip is to start with a monthly expense tracking spreadsheet in Excel (see our post on getting started). Another alternative is to bet on spending control apps like Organizze and Mobills. Be that as it may, the rule is clear: your revenues must always be greater than your expenses.

2. Have an emergency reserve not to get in debt

Spending less than you earn is critical, but not enough to keep your bills up to date. In addition, it is also very important to have an emergency contingency reserve and not get in debt again. After all, what if someone in your house loses their job, for example?

According to experts, the amount of emergency reserve should be equivalent to your basic expenses for a period of 6 months. To add this amount, use the spend sheet, which will help you see how much is left in your account each month, as well as to identify where you can “wipe” expenses. Ideally, stipulate how much you can save each month and set aside that amount as soon as your salary falls into account.

3. Research Investment Options

Where to save the emergency reserve money? Savings, of course, are always an option. But if you want to make your money pay more, you might want to look for other forms of investment. In the case of emergency reserve, a good alternative is to invest in Selic Treasury. With income greater than savings, it can also be withdrawn at any time, is tax exempt and allows you to make monthly deposits so you don’t get indebted.

When choosing an investment, consider three main factors: yield (how much you get for the investment), risk (the likelihood that the return will be less than the amount invested) and liquidity (the ease with which you can withdraw your money). Research alternatives and make separate investments for different situations!

4. Make plans for using money

Have you ever stopped to think that money is not a purpose but a means? In other words, we usually don’t want to make money just for the sake of it. Our goal is to put dreams into practice, live new experiences, among other good things that money brings. This is why it is so important to have definite savings plans so as not to get in debt.

After all, if I don’t know what I want to do with money in the future, what is the point of not buying a new outfit or having a beer with friends at the present? So put your dreams on paper and calculate the value needed to make each one come true. Then determine how much of your salary you will allocate to them, thinking about the time it will take to reach the full amount.

Remember that goals don’t have to be dramatic or long term. They can be as simple as saving for a weekend on the beach or buying a new appliance.

5. Think about how you can increase your earnings so you don’t get in debt.

When talking about how not to get into debt, it is normal that the first recommendation is to save, because this way, you only work with what you already have. But what about when you’ve already wiped out all your expenses, sacrificed leisure time, and still can’t make an emergency reservation?

In this case, the only way out is to look for ways to increase income. You can look for a placement in another company, try a promotion, participate in free courses that can add value to your resume, start selling a product, etc. Here on Pay First Credit’s blog, you will find several tips on how to earn extra money.

Lastly, if you have your own business, getting a good loan can be very useful for investing in modernizing your business and thus increasing your revenue in the long run. In addition to finding an advantageous credit option, the key to success is to know very well what you want to do with the loan money and how much it can bring back. Enjoy that you are on our platform and order now a loan here not to get in debt again.