Some Debt is Good
Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates.
Some Debt is Bad
Don't use a credit card to pay for things you consume quickly, such as meals and vacations. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay the bill in full. If there's something you really want but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges.
Get a handle on your Spending
Most people spend thousands of rupees without much thought to what they're buying. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.
Pay off your Highest-Rate Debts first
The key to getting out of debt efficiently is to first pay down the balances of loans or credit cards that charge the most interest, while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.
Don't fall into the Minimum Trap
If you just pay the minimum due on credit-card bills, you'll barely cover the interest you owe, to say nothing of the principal. It will take you years to pay off your balance and potentially you'll end up spending thousands of dollars more than the original amount you charged.
Watch where you Borrow
It may be convenient to borrow against your home to pay off debt, but it can be dangerous. You could lose your home, or fall short of your investing goals at retirement.
Expect the Unexpected
Build a cash cushion worth three months to six months of living expenses in case of an emergency. If you don't have an emergency fund, a broken furnace or damaged car can seriously upset your finances.
Get help as soon as you need it
If you have more debt than you can manage, get help before your debt breaks your back.
