Watch Your Debt Level

On August 12th, 2011, posted in: Accounting by 0 Comment

It may seem like a basic principle to maintain a low level of debt, but many families are struggling with this. How do you avoid it? There’s an old practice that will help: give 10%, save 10%, and live on 80%. It will not always be convenient to give and to save, but discipline in these areas will reward you well. If you always set aside a reserve, then when the air conditioner on your house goes out or the transmission on your car needs to be replaced, you’ll have the reserves available to cover the cost.

When my daughters were getting ready to be married, my advice to them was, “Only live on one salary because if you live on two salaries, you will always have to work.” Why not keep your options open? Besides, saving most of the second salary will greatly increase your retirement options. Use some of it to pay cash for fun things like vacations or sailboats. Most importantly, there is great comfort in knowing that, if for any reason, both partners in a marriage aren’t working, you’ll still be able to get by on one salary without changing your lifestyle.

With credit cards, try this philosophy: if you can’t pay the statement in full every month, you don’t need to have it. It sure saves a lot of interest! As a virtual accounting firm we offer advice to our clients on how to save for the future.

What’s your favorite way to avoid debt?

 

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