How to Not Get in Debt

How to not get in debt is probably the most important thing we can learn about debt. With the recent credit card crisis, many people have had to turn to extreme measures like foreclosing on a home or credit card consolidation just to stay afloat. Well, the easiest way to avoid these issues is to not get in debt in the first place. So if you're in ok shape, read on. Here's how to not get in debt for life.

The first step to not get in debt is to completely swear off the "easy" money that sharks offer. Debt consolidation, pawn shops, check cashing places, pay-it-forward paycheck services, and the like are all bad ideas and should never be used. Get a bank account and keep an emergency fund in it and you'll be alright.

The second step to not get in debt is to not borrow. This doesn't make sense for some people, so let me amend that: Borrow only when it makes sense. Borrowing makes sense when the money is used for assets that increase with value over time, like a house or an education. There is a difference between good debt and bad debt. Good debt is paid towards assets. Bad debt is paid towards 52 inch HDTVs.

To not get in debt, keep your FICO score high. The best rates for houses, cars, and small businesses go to credit scores of 760 or higher. Now your three reports can say something different, so if someone decides to take your lowest score, and charge you higher interest, you have to argue that point.

The next step to not get in debt is to not touch home equity. If you already have a house, don't borrow against it. Stay away from reverse mortgages and things that play with home equity at all. Unless you're starting a business and you have a plan and you've run that plan by SCORE, I wouldn't recommend tapping home equity for anything.

The last step to not get in debt is to eliminate any debts you have immediately, highest interest rates first. We're all human. Sometimes you just have to have something now. But if you do this, eliminate the debt with a passion. Credit cards give a month to pay off. Make this the first priority. Do all these things, and stick to it, and you won't have to worry about debt at all. Good luck!