6 Tips To Avoiding Financial Debt As A Low-lncome Earner.

Financial indebtedness is no doubt one of the major problem that has hindered or slowed down the financial success of most persons. It has basically been a setback in their quest to be financially stable and successful. Worst still, is that they can't even account for the reason why they borrowed the money in the first place nor be able to repay it. 

It's important for you to know that being financially indebted is like having your freedom taking away from you through imprisonment, especially when you've got no adequate means of paying paying back. And unless you're able to fulfill the requirements by paying all your debt, you'll remain in that prison or in a state of financial incommunicado. 

It's basically for this reason that as a small or low-income earner, whose purchasing power is limited by finance, you'd want to do all you can to avoid being financially indebted. For it's rather easier to avoid it and live a debt- free life, than to manage and get out of it.

In today's post, we want to consider some tips that'll help you to avoid financial debt as a low-income earner, live a debt-free life, gradually grow your income, and also consequently become financially stable and successful. Without much Ado, let's get started looking at these tips one after the other.

6 Tips To Avoiding Financial Debt:

There are six basic methods I often use to avoid being financially indebted as a low- income earner myself. I want to share with you these six tips or methods, and I hope it also work for you, same way it has been working for me. Let's get right ahead.

1. Plan Your Expenses:

The first and foremost step to avoid being financially indebted is to often plan your expenses before you start spending. This practice makes you careful and organized in how you spend money. Planning your expenses no doubt enables you to be more circumspect in choosing the right things to spend money on, and things you can obviously live without. 

The reason a lot of persons get into financial debt, isn't just because they do not have enough money, the major reason more often than not, is lack of planning their financial expenditures before they start spending. 

This is typical of people with sanguine temperament. Because of their impulsive or spontaneous lifestyle, sanguines rarely have a budget nor plan how they'll expend their money. Finance planning and management is one of the hardest thing for typical sanguines. Little wonder they easily become bankrupt, and financially indebted.

The fact that our temperament plays a big role in how financially stable or successful we are. Though I'm not in any way saying that only those of sanguine temperament gets financially indebted, but they're more prone to it than others because of their flamboyant lifestyle. 

Anyone could get into debt, if they do not properly plan and manage their finances. But if you want to avoid financial debt, the first thing you ought to make part of your lifestyle when it's got to do with money management, is to always plan your expenses before you start expending it.

2. Spend on 'Needs' not 'Wants' :

Needs are quite different from wants. In one of my previous post about basic concept of finance budgeting for low-income earners, I did took time to explain the difference between these two terms. 

Needs are basic necessities of life that you can't do without at any particular time. Food, clothing, shelter, or any other thing that could make life easier for you, and without it, it's almost impossible for you to advance in life. While wants are things that you desire, but which are not so much important or appropriate to have at a particular time. 

Somethings may be important to us in life according to our desires, but it's not everything that's expedient or appropriate to have at a particular time in life. 

It's for this reason that, as a small or low-income earner, you need to always place and prioritize your needs above your wants, in order to avoid expending money on things that are less important to you and which you could obviously do without. This practice will enable you to save more money and avoid becoming financially 🏦 bankrupt, that could also lead to financial indebtedness.

3. Have A Savings Plan:

Saving 💰 money is sure one of the best ways to remain financially stable and afloat. You cannot become financially stable or successful as a low-income earner, if you don't have a money saving culture or mentality. 

Sometimes, you might need to save to start a business, buy stocks and shares, invest in a particular business venture, to just acquire a skill that'll boost your competence and increase your wage, or you could save for retirement. 

Having a savings plan basically means setting aside a particular amount, say 10 or 20 percent of your total daily, weekly or monthly wage or income, while you plan your budget or expenses on the remaining 70 or 80 percent. This will no doubt help you to remain financially afloat, and you'll always have something to fall back on, when the need arises, rather than go borrowing.

4. Have An Emergency Reserve Plan:

Asides having my savings plan, another plan I also do have in place, which has enabled me to avoid borrowing to solve a particular financial problem, without also touching my savings, is my emergency reserve plan. 

In emergency reserve plan, you domicile a particular amount or a percentage of your total earnings just for the purpose of solving some unexpected or unforseen circumstances that requires finance. For me, I often divide my income into 3 parts, 70/20/10. 

70 percent of my gross income goes for expenditures as will be determined by my budget. 20 percent is often set aside for savings, while the remaining balance of 10 percent will be reserved for emergencies. 

This practice has no doubt enabled me to avoid debt, and also keep up with my savings. I'll thus urge you to adopt this practice, because it really works in helping you to live a debt- free life.

Diversify Your Income Stream:

If you're like me, who likes to get money from different sources, then you've got no reason being indebted. Even if you're not like me, I'll urge and also encourage you to not depend on only one income source. 

You need to diversify your income sources, so as to have multiple streams of income. It's a wise decision to make, especially in these days of highly unpredictable and unexpected economic crunch in almost every sector of the world's economy. As a low-income earner, who's perhaps earning a little pay per day, week or month. You don't need to put all your eggs in one basket, it's risky to do that. 

Find a away to add to your income stream. You could even use part of the money you're earning to start a business, or perhaps venture into another side gig or hussle. The bottom line is that you should not dwell on just one source of income, endeavor to have two or more streams of income. This will no doubt also help to keep borrowing very far away from you.

6. Be Financially Disciplined:

Observing and practicing these tips from numbers 1 to 5 without doing this number 6 will amount to an effort in futility. Being financially disciplined is the Crux of the matter. Infact, to say the least, if you're not financially disciplined, it will be very hard for you to not be financially indebted, not to talk about becoming financially stable and successful. 

It's basically for this reason that I made reference to Sanguines at the beginning of this post. Sanguines are easily the most undisciplined of all the four temperament categories. They often live for the now, and wants to get everything they desire immediately without putting tomorrow into consideration. 

Therefore, finance planning, budgeting, saving and management is a very difficult task for them. It's for this reason that typical sanguines easily gets broke and bankrupt. 

In order for you to live a debt-free life as a low-income earner, you must be able to discipline yourself financially. Be more frugal, deliberate and circumspect in your spending, and avoid being extravagant. Learn to live within your means, and also avoid competing with anyone. Remember, it's your life and no one else. 

These are my few tips on how you can avoid becoming financially indebted, live a debt-free life, maximize your earnings or income and remain financially afloat. You can also add yours in the comment section if you like, to help others who might need it. Thanks for reading.