It seems quite obvious that if one wants to get out of debt, it is necessary to stop amassing more debt. But the truth is that this simple principle trips up any number of people trying to dig themselves out of the debt hole. So, I feel it is important to address the issue. If you are serious about eliminating debt, you need to stop getting into more debt.
Paying off one loan and getting another
One of the most common debt management problems is the fact that many people, when they pay off a credit card (which is just another type of loan), see it as available funds. We have ingrained in our psyches now that a credit card equals money we can spend. Though this is technically true, we tend to forget that the money isn´t our money. It´s the credit card company´s money. This means that we have to pay interest on it. And it is very easy to pay off a credit card and two months later, when we see something we really want, pull it out and say, "I have the money for this!"
Others see the lack of making a car or mortgage payment as a reason to get another loan. Once the loan is paid off, and the monthly obligation is gone, many of us feel as though we are ready to take on a different obligation. After all, now we have an "extra" $300 that we can put toward a new monthly loan on a boat. Or we feel like we should use the shiny new equity in our homes to take a luxury vacation. But this is simply replacing one loan with another, and does not do much toward building wealth or actually staying out of debt.
Ways to avoid getting into more debt
You have to change your lifestyle if you want to have a successful debt elimination experience. This means carefully evaluating purchases so that you are not getting into debt for things that you do not need. Additionally, this means taking care of actual needs first and using what´s left to buy wants. It is temptingly easy to buy a new outfit or stereo at the beginning of the month and then charge your groceries on the last week of the month because you need food, and you don´t have the ready money for it. Create a budget, and make sure that you account for bills, groceries and other necessities before spending money on wants.
Keep credit cards for certain things only. I have a miles card that I use only for groceries. Nothing else. And groceries are in my monthly budget, so I pay off my "grocery card" each month with the budgeted funds. If you can´t resist the call of plastic, leave it home when you go on casual shopping trips. Take it on trips so you have it for an emergency, or take it only to the grocery store, but carrying a credit card regularly to the mall or to Wal Mart is asking for trouble.