Having some debt such as a mortgage, car and student loans, etc. is to be expected. However, accumulating an unmanageable amount of debt — especially unsecured, high-interest debt — may cause undue stress and financial hardship. But the good news is that there are many ways you may help stop debt from becoming a problem by taking control of your financial situation.
By using a few helpful online banking tools and a prudent approach to your finances, you may help avoid debt problems and keep many financial stresses at bay. Our top-six suggestions to help get you started are:
- Lower your debt-to-income ratio. Use credit cards only up to what you can afford to payoff every month. If you find that you're struggling to make monthly payments on unsecured debt, closely examine your budget and look for ways to cut your expenses and/or bring in more income (see #3, below).
- Use a savings account to help alleviate stress. Save a reasonable portion from each of your paychecks so you won't have to use credit — or as much credit — on purchases or emergencies. Learn about all of our savings options.
- Open a Certificate of Deposit to help you reach longer-term goals. The restricted access to your money helps you learn a more disciplined approach to saving.
- Set a budget, and stick to it. Take a hard look at your expenses and set a realistic and reasonable budget for things like food, housing, transportation, insurance, recreation, savings and incidentals. Be sure to keep track of how you're doing and work to stay within the budget you've set. Don't worry, you can always adjust the amount of money given to each category — the important part is to spend less money — or at least no more — than you bring in. If you still find yourself accumulating debt, you may need to rethink your priorities or find ways to earn additional income.
- Seek credit counseling from a reputable source if you're having difficulty making your plans work. They'll work to help you understand the principles and mechanics of how to avoid debt problems. A qualified counselor can provide you with solid debt advice and assist you in acquiring healthier financial habits.
- Shop wisely. Sales, clearances and discount stores offer great opportunities to save — and very often boast store-brand merchandise that's just as good as a name-brand counterpart.
- Practice patience. Self-control in spending is crucial to help avoid debt problems and make the other rules of debt prevention work. Learn to carefully evaluate your "wants" and "needs" both in the short and long term. Often what seems like an immediate need is actually not, and putting time between yourself and the purchase often helps to make the distinction. It also helps to view purchases in terms of what it costs in time, or comparing the purchase price to your income on an hourly basis. If that "gotta have it" purchase actually costs you a day and a half at work — away from being able to actually enjoy it — is it really worth it?
Wherever you are in your financial journey, if you want to help stop debt from becoming a problem, avoid debt problems altogether or work toward other financial objectives, Ally has deposit accounts to help you along the way. We'll do right by you and your money.