In an episode of Bobbi Rebell’s Financial Grownup podcast, bestselling author (“The Automatic Millionaire”) David Bach talks about his past experience being in credit card debt and how he’s been credit card debt-free now since age 21.
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Even though he became an entrepreneur due to his credit card debt in college, Bach still believes that credit card debt is a bad debt which should be avoided like a plague. After falling into this kind of debt twice, he learned how to avoid it and hasn’t failed in over 30 years. Here are his three ways to avoid credit card debt.
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Increase Your Income
This might seem basic but it’ll surprise you how many people ignore this. For Bach, his first step in avoiding credit card debt was to increase his income. To do this, he started selling T-shirts to teammates and fellow students — his first business. While making income from this business, he paid his expenses from a debit card and an American express card which he paid off every month. And by doing so, he was able to fix his credit card debt.
Any extra income you get can help you to take care of those expenses you’d usually turn to a credit card for, thereby saving you from the frequent borrowing that will land you in credit card debt.
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Only Take Productive Loans
Sometimes borrowing can be inevitable because life happens even to the most frugal of us. So Bach advises that “if you’re going to borrow money, borrow money to buy something that will go up in value. Don’t borrow money to buy something that goes down in value from the moment you buy it.”
This might be a conservative way of living. But by doing this, you ensure your loans don’t come to bite you as whatever you have borrowed for can be sold down the line to cover your debt (and perhaps even make you money).
Eliminate Wants That Don’t Serve You
Not every want has to be satisfied. You don’t have to make that group trip or buy that luxury item because a celebrity advertised it on TikTok.
If you’re in debt, commit yourself to frugal living for at least six months to a year to pay off your credit card debts. Then, strongly consider maintaining the same lifestyle afterward. One way to do this is by cutting out unnecessary expenses.
“Every month, make a goal to cancel one thing you’re not using like a gym subscription or other subscriptions to save money which can free you up from taking a credit that could plunge you into debt,” Bach said. Doing this should help you trim down your outgoing money and keep you from falling back into a cycle of credit card debt.
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This article originally appeared on GOBankingRates.com: ‘Automatic Millionaire’ David Bach: 3 Ways To Avoid Credit Card Debt