Any debt relief expert will tell you that getting out of debt is only one half of the solution towards financial freedom. If you truly want to be debt free and remain that way for the rest of your life, you need to eliminate the cause of your financial downfall.
There are two reasons for accumulated debt. One is poor financial management. This is an internal problem that you can control. It includes your spending habits, budget planning and your overall personal finance management skills. It can be solved by developing the right practices that will help you live within your means.
The other reason for your debt problems involves factors that are beyond your control. These are usually unexpected circumstances that affects your source of income and thus render you unable to produce the resources that will finance your basic needs. It includes job loss, medical illness, accident and even a major economic downturn. It is more difficult to recover from these blows but you need to know that there is a way to help prepare for them.
Growing your reserve fund is a real lifesaver in times of financial crisis. When Americans were faced with the economic downturn in the mid 2000s, even people who practiced wise spending habits found themselves suddenly buried in debt. The reason for this is a lack of reserve or emergency fund. When they lost jobs or had to settle for a low paying one, they turned to their credit cards to finance the most basic needs that they had. We all know how credit cards can be a real pain once the balance starts to increase and you are unable to meet the minimum payments.
If you really want to stay out of debt, you need to grow this fund so that you are prepared for future financial situations that compromises your main source of income.
A lot of people fail to grow their reserve fund because they think that it should be grown quickly. You have to understand that this takes time. Unless you really want to make the appropriate sacrifices, it is alright to make small but steady deposits into your reserve fund. The important idea here is to just start growing it - even as you are paying off your debts. Start with a couple of dollars and as you get used to it, you can slowly increase your contributions every month.
A helpful technique in staying true to your emergency fund contributions is to treat it like a monthly bill that you have to pay for. Include it in your monthly budget so that you are not tempted to spend it. As much as possible, grow this fund in a separate account.
It is also advised that you grow your savings in various banks. Never settle with only one bank because if something happens to that bank, you may lose everything that you worked hard to save. If you want, you can invest your money where it can grow.
Lastly, stop acquiring more debts and start paying off what you owe. Saving for the rainy day and paying off your credit obligations go hand in hand to help you achieve financial freedom.