Recent Federal Reserve statistics show that the average American household holds around $9,000 in credit card debt. Although many households manage not to carry any debt at all, some have debt in the six figure range and beyond. The first step in eliminating this debt – regardless of the amount owed – is too avoid adding any additional debt.

Easier said than done, right? Not necessarily. With a few simple pointers and a bit of financial discipline, avoiding additional debt can be fairly easy:

1. Live Within Your Means: We all want a nice house, a new car, fancy dinners, exotic vacations, and the latest feature-packed home entertainment system. But balancing your monthly income with outgoing expenses is the first step in avoiding debt. When these numbers are out of whack, it is too easy to use savings or credit cards to satisfy our wants and needs. Use a monthly budget to help you figure out whether your expenses fit within your income and look for ways to decrease your expenses when necessary. Continuously update your budget (both income and expenses) to reflect your lifestyle and the means you use to support it.
2. Have an emergency fund: Possessing a healthy amount of savings reduces the likelihood that you’ll use the credit cards for emergency car repairs, medical bills, or replacing your burnt out home furnace. A good rule of thumb is to have 3 – 6 months worth of living expenses set aside for emergencies. Start small, and add a little more each month. Before you know it you will have a substantial emergency “cushion” to fall back on.
3. Only charge what you can afford to pay: Keep your budget in mind before charging anything on your credit cards. Make sure any expenditures fall within your monthly budget. This will ensure that you aren’t charging items that will accumulate costly interest over a longer period.
4. Only Use Cash: Many people find themselves using their credit cards to pay for items or expenses instead of cash because they feel the need to hold on to the cash for emergencies. That’s what the emergency fund is for. Use cash for everything, every time, and you will avoid adding additional debt problems as well as the high interest rates that accompany them.

Related Posts:

1. Top 6 Reasons for Credit Card Debt
2. Top 4 Ways to Avoid Lawsuits from Creditors
3. The 6 Steps to Making a Budget That Works
4. Putting Your Budget Into Action
5. Using New Car Purchases to Settle Credit Card Debt