5 Tips To Avoid Long-Term Debt

Long-term debt can be an unnecessary burden that brings your finances to a standstill, especially if you’re forced to pay on debts longer than you want to because you don’t have the money to pay them off sooner. To keep your long-term debt from becoming overwhelming, follow these five tips to avoid long-term debt. If you’re already in debt, make sure to read How to Get out of Debt When YouDon’t Have the Money to Pay off Your Debts.

1: Don’t buy more than you can afford

In a perfect world, you’d be able to afford everything you wanted without ever taking on long-term debt. The truth is, however, that most people need a little extra money here and there—whether it’s for new tires or college tuition. If your budget is tight, it might be tempting to take out a line of credit or apply for a small loan at a bank or credit union. But doing so could jeopardize your long-term financial security; if you do need to borrow in these situations, make sure to pay back with interest as soon as possible.

2: Know what your real salary is

Companies pay a lot of money for recent college grads. Just because you’re being offered $65,000 doesn’t mean that your salary is $65,000 – it may be less after taxes and health insurance costs. Know what you take home to determine whether or not you should be living on your own or with roommates, renting or buying a house or apartment, etc.

3: Get credit cards with lower interest rates

If you carry a balance on your credit cards, it’s worth calling up your credit card companies and seeing if they can offer you a lower interest rate on any of your existing balances. If they refuse or want to charge you an upfront fee for a lower rate, look into getting new cards with better rates that don’t require transferring balances. You might also consider moving future spending from your old credit cards to your new ones as well. Just be sure not to close out your old accounts before all outstanding charges are paid off; otherwise, you could hurt your credit score.

4: Prioritize paying off higher interest rate loans first

If you’re buried in credit card debt, prioritize paying off higher interest rate loans first. If you make minimum payments on your high-interest rate credit cards and want to pay them off as quickly as possible, try transferring balances to a 0% APR credit card or balance transfer card. Once you’ve paid down those balance transfers, focus on paying off your regular loans such as car loans, mortgages, and student loans with fixed rates. For example, if you have a 5% and 10% APR loan—pay off your 5% loan before moving onto your 10%. And if all of your loans have different APRs—pay off the loan with the highest APR first.

5: Consider long term care insurance

Long term care insurance is a crucial investment for anyone likely to need assistance with activities of daily living at some point in their life. The average stay in a nursing home costs low, but long term care insurance can help you avoid getting into that situation. Long term care premiums are expensive, but most people could pay for coverage over time by simply increasing their monthly mortgage payment by about one cup of coffee per day!
Weigh your options and make an informed decision about whether long term care insurance is right for you and your family. If it seems like a worthwhile consideration, put it on your list of potential investments for future goals. There are many types of financial assistance when it comes to paying off long term care expenses; learn more here.

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