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Avoid a Debt Trap

Are you in a position where there are too many installments to pay? These could be the house, the car, the new home theatre, the computer and to top it a large credit card bill. Your income is short of the amount you have to shell out every month. Worse, the raise you anticipated has not come by. You have fallen into a debt trap.

To avoid a physically and mentally destroying ordeal like this you have to prevent falling into a debt trap. There are many causes for debt traps.
1. Wanting to buy it all at once
2. Unplanned and uncalculated expenditure
3. Not accounting for inflation
4. Not leaving money aside for unanticipated emergencies
5. Not planning finances with your spouse or other members of the house.
6. Not accounting carefully for the future
7. Not leaving enough money to spare for household expenses.

To prevent falling into a debt trap we have to remedy the causes. A debt trap can be avoided by:
1. Do not have more than two major installments running together.
2. Plan your expenses in detail to the very end of your debt period.
3. Make sure you have accounted for inflation.
4. Keep about 20% of your salary aside for unanticipated expenses.
5. Maintain financial transparency in the house
6. Consider future expenses especially large expenses carefully
7. Keep around 25% excess money for day to day expenses.

These simple precautions will keep you out of unmanageable debt.

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