Escaping the DEBT Cycle

Published in

The Money Matter

5 min readSep 7, 2022

The intent of this short piece is help you manage one of the key aspects of money better. We want to run through couple of pointers using which you can move past being the average Joe in the economic sphere and use your money effectively. Debts are not a bad thing. Unsupervised and unplanned debt can lead to a ton of bad things. Bad things I do not need to shout out. Bad things you’ve already heard/seen all though your life.

I remember being in massive debt during my first year of employment because I kept swiping my credit card possibly everywhere, needed or not. With money that is not mine. The only money I had was invested in mutual funds & ended up liquidating my equity investments to payoff the credit card and finally close it. My retirement corpus already sighs.

Nonetheless, it’s never too late!
Here are some pointers I personally follow and would encourage everyone to give a try, for good.

1. Plan your long term purchases

Many tend to make big ticket purchases like an expensive phone and other gadgets using credit cards or EMI options. It’s a wise choice because you will often get upfront discounts and no cost EMI options for 3–6 months & you can distribute the purchase cost into months. The problem comes in when we end up making multiple such purchases only to end up making a bulk payment every month as EMIs. Plan what you need and when you need it. Prioritize and then go for the buy. Do not let FOMO kick in. Many businesses are thriving on your FOMO.

2. Avoid impulse buys

The best way to not get into debt is not buy things you cannot buy twice. Impulse buys are never useful and you can easily make do without them. If at all you have to buy it, sit on it for a week. If you feel the need, go ahead and get it. More than often, I bet you will forget about it altogether. When I first started using this technique, I saved myself 55k worth of purchases in 3 months.

3. Have a list

Lists are love. Lists work wonders. Lists keep you inline. List out everything. From your day to your grocery. Saves time, money and so much mental energy. Having a list and sticking to it ensures you’re not buying anything outside while all your essentials are covered. Making a list before I visit the supermarket every month has helped me cut down on processed food to such an extent. (I used to hoard on noodles and every biscuit variety available)

4. Avoid having multiple credit cards/wallets

There is nothing wrong in eating Maggi and Top Ramen. It is a matter of convenience and human psychology that takes over. You could be spending 1k using 5 different cards and thinking you’re inline. Having everything on one card/wallet is a one stop convenient solution. Also, this means you have lesser payoff dates to monitor. Pick a card that best suits your needs and you should be good to go. Rely on credit for the benefits but not too much. All your expenses on one card means you get higher rewards and benefits too. Channelize.

5. Set your own credit limit

You have been offered credit of lakhs. The upper limit really does not matter. None of it is your money, so quit being happy when there’s a credit limit increase. The only takeaway from those situations is that your worthy of credit and more people/orgs will be willing to lend you money. Setting a usage limit is a check everyone should self-impose. You have to stop allowing yourself more often. Almost every card or wallet you use will let you do that on their mobile apps. Go ahead and cap it.

6. Friends and family discounts

This is one of the toughest things to do if you ask me. Something I personally struggle with. When a friend or a family member asks for some extra cash or maybe my brother needs a new phone. Not fancy but really in need.
There have been instances, I made big purchases for family using my credit card. Confident that I will pay it off with my next salary. I did that and you probably will too but it is the habit that will lead to a downward spiral.
You cannot save anyone else when you’re drowning. Mastering the art of saying NO and self preservation will keep you afloat my friend.

7. Recording Expenses

You have a monthly budget set. End of the month your bills have exceeded your budget. Often multifold. Surprising right?
All big things are a cumulation of many little good things. Your month will not be money smart if you’re not money cognizant daily. A small but invaluable habit. I find this very helpful and it hardly takes a minute. Once you start watching your daily spendings, you see patterns. These patterns will help you determine what are the loopholes you can plug. Believe it or not, cutting down on tea helped me save ~6k every month. There were days my beverage bills were higher than my meals. Not to mention all the health benefits crap cutting has brought. Silver lining!