In recent times, India has also adopted the Western finance culture, incorporating the use of credit cards, online loans, and buy-now-pay-later schemes as a means of marketing products to people. Consequently, finance has become readily accessible in India, leading to a surge in the number of households that are indebted and the total amount owed. As of March 2022, retail loans in India amounted to a staggering Rs 34 lakh crore.
The past decade witnessed companies such as HDFC and Bajaj Finance emerge as significant contenders, thriving on the trend of borrowing. HDFC experienced an astonishing growth of 3,600%, while Bajaj Finance grew by 2,250%.
In case you find yourself caught in a cycle of debt and are unable to save sufficiently, it is imperative to identify the underlying cause and address it promptly to avoid further complications.
To avoid falling into a debt trap, there are a few things you can do:
Create a budget and stick to it: One of the most important things you can do to avoid a debt trap is to create a budget and stick to it. Your budget should include all of your expenses, including bills, groceries, entertainment, and any other expenses you have. By creating a budget and sticking to it, you can ensure that you are living within your means and avoid overspending.
Avoid taking on unnecessary debt: Before taking on any debt, ask yourself if it is necessary. Avoid taking on debt for things that are not essential, such as luxury items or vacations. If you do need to take on debt, make sure you have a plan to pay it off as quickly as possible.
Pay off existing debts: If you have existing debts, focus on paying them off as quickly as possible. Start with the debts that have the highest interest rates and work your way down. By paying off your debts, you can reduce your financial obligations and free up more money for savings or other expenses.
Build an emergency fund: Having an emergency fund can help you avoid taking on debt in the event of an unexpected expense, such as a medical bill or car repair. Aim to save at least three to six months’ worth of living expenses in an emergency fund.
Use credit cards wisely: If you use credit cards, make sure you use them wisely. Avoid carrying a balance from month to month, pay your bills on time, and try to keep your balances low. If you can’t pay your credit card bills in full each month, consider using cash or a debit card instead. cancel all your credit cards if you are struggling to maintain god finances.
By following these steps, you can avoid falling into a debt trap and maintain a healthy financial situation.
