7 Ways to Keep Debt at Bay

4 Mins read

The majority of people in the world have a common goal of being financially secure. What this looks like, though, is different for everyone.

You don’t have to be working a minimum wage job to have to worry about financial security. In fact, a lot of “rich” people are struggling with debt on a massive level. 

No matter how much income you’re bringing in, if your debt load is too heavy, you’ll never make enough money. The key is to avoid debt in the first place and make your hard-earned money yours, free and clear (after taxes).

It’s not an impossible task, but it does require dedication and determination. When you’re ready to keep debt at bay, use these seven tactics to get and stay financially secure.

1. Learn What “Good” and “Bad” Debt Are

Some financial experts will tell you that any debt is bad debt. However, others are less strict, and they advise you to focus on getting rid of bad debt first.

Good debt is anything that you invest in financially with the aim of improving your health or profession. This includes your college education, furthering your profession with a specialization, or investing in real estate. Medical debt isn’t something we prefer to have, but if it’s essential for your health, it’s still considered “good” debt.

Bad debt, on the other hand, comes when you buy things you don’t need to have immediately. Could you have saved up cash for the same item and bought it later, without interest added on? 

This type of debt is also what you accrue when you’re living outside of your means. Trying to keep up with the Joneses by maxing out your credit cards is not going to get you ahead financially.

Bad debt is what you want to start focusing on paying off as soon as possible. Good debt can wait.

2. Use Credit Cards Responsibly

That’s not to say that all credit card use is bad debt. When you take out a credit card and use it responsibly, it can actually help your finances.

Revolving debt, such as a credit card, is an important factor in your credit score. Use a card that offers rewards that are relevant to you, such as frequent-flyer programs or cash-back offers. Make sure you pay off the debt every month.

If you can do this consistently and well, it will boost your credit score. If you do need to take on good debt later, a high credit rating lowers your interest and lets you pay off the loan sooner.

3. Pay Off Old Debt

Maybe you already have some debt, so keeping it at bay isn’t going to work quite yet. That’s okay. You can work on paying it off strategically and then avoiding it in the future.

To pay off old debt, focus on these tips:

  • Pay off balances with high interest rates first. If you can consolidate them into a loan with a lower rate, that works.
  • Check your credit report for any collections accounts. Pay off the newest ones first.
  • Pay small amounts on any medical debt you owe. Even five dollars a month will pay the debt off faster than ignoring it.
  • Consider paying off your lowest debt first. Then, you can take that monthly payment and start applying it to your bigger debt.

Making random attempts to pay off your debt isn’t going to get you too far. Come up with an expert-approved strategy to get rid of your old debt quickly.

4. Get Insurance Coverage

You’ve heard the warning, “Accidents happen.” When you’re already trying to actively avoid debt, an accident that keeps you from working is hazardous to your financial health, too.

There are five main types of insurance you should always carry. These are especially urgent if you’re a physician or in another profession where if you don’t work, you don’t get paid:

  • Auto insurance with bodily injury and personal injury protection
  • Medical insurance with a low deductible and an out-of-pocket cap
  • Disability insurance in the event an accident or illness keeps you from working for short or long periods
  • Mortgage insurance if you owe a lot on your home to protect it if you are unable to work or pass away

Insurance isn’t considered a debt. It’s an essential part of financial stability that protects your assets from emergencies that would otherwise take them from you.

5. Monitor Your Debt-to-Income Ratio

The credit bureaus monitor this; why shouldn’t you?

Your debt-to-income ratio is a formula that looks at how much you make monthly compared to how much you owe. This number is what lenders look at to determine how well you can handle your finances. Are you responsible with your money and that of other people’s?

The quick way to determine your debt-to-income ratio is to add up all your bills first. Then, add up your gross income (what you take home) and divide the total debt by your income. The result, as a percentage, is your ratio. The ideal rate for this final number is 25% or less.

6. Have an Emergency Fund

We all know the importance of a nest egg, but how much you have in this emergency stash depends on the expert you listen to. As a general rule, most experts agree that you need a minimum of $1,000 in an emergency fund.

Once you’ve gotten that amount built up, start working toward three to six months’ worth of expenses in your savings. This is a hefty nest egg that will help prevent you from taking on debt if something happens and you can’t work.

7. Live on a Budget

Budgets aren’t just for people living paycheck-to-paycheck. If you want to be financially successful, learn how to budget your money.

A budget helps you know how much is coming in and where your money is going to. You can still allocate a certain amount to enjoying your life. It just needs to have a cap on it, so all your expenses are paid, too.

Part of your budget should include retirement funds. The closer you are to retirement, the more you need to be including in this part of your budget.


Whether you’re barely scraping by or you have homes all over the world, debt is never a good thing. Your money should be yours, not already ear-marked for a lender. 

Following these seven tactics will help you on your path to financial security at any step in the journey!