Tips on avoiding debt

Now that Christmas is over, millions of Americans will find themselves in financial hardship because they spent too much for the holidays. The proof: debt advice helplines say January is their busiest time of year. Many people even take out personal loans to cover Christmas.

There are several things you can do to avoid the Christmas crunch. One idea is buying early in the year and spacing the purchases out over a few months. Spending an extra $30 a month is a lot easier than spending an extra $400 in December. If you find it hard to shop for Christmas early in the year (I know I do!), then there is another idea that works the same way. You divide the amount of money you plan to spend on gifts (let's say $400) by 12 (which is $33) and save that amount each month over the course of the year. Then when December rolls around, you have the extra money $400 saved up and ready to spend.

Actually, I use this technique for all my expenses that come annually or semi-annually, like car and health insurance, and also travel expenses. The money really adds up fast and you don't even miss it every month. I have avoided secured loans, credit card debt, and car loans using this method. Another big loan that I plan to pay off is the mortgage. I know it sounds crazy, but if you just make extra payments monthly toward your principle, you can pay off your mortgage years earlier than its term.