When used properly debt can be a very useful tool. It can help you start or expand a business, pay for school and more. But it’s important to remember that you will have to repay all your debts eventually. Taking too much too quickly can result in a cycle of debt that can be difficult to break. 

A cycle of debt is when you continue borrowing to pay off your current loans with no end in sight. This cycle is not only expensive, as you’re paying fees to take out loans, but also makes you dependent on loans for all your needs. Once caught in this cycle, it can feel overwhelming. 

But there are many ways you can avoid falling into the cycle of debt and to get out if you’re already there. Follow these tips to break the cycle of debt:

Stay calm

First, it’s important to stay calm. Debt can feel overwhelming but stressing about it won’t help you get out of it. In fact, being stressed can lead to making poor decisions and may even have health consequences. So, it’s important to take a deep breath, and make a plan. Your plan, not your stress, will help you break the cycle. 

Prioritize your debt payments 

Use proven methods like the snowball method to pay off your debt (learn more here). Start by listing out all your debts from smallest to largest. Include everything you owe. Then write on a calendar when each loan payment is due. Pay off any debts that have daily or growing fees first to avoid further debt. Then pay off your loan with the soonest due date to avoid late fees. Pay off the next due loan, and then the following.

Review your spending and make a monthly budget

On top of your debt payment plan, it’s key to examine your spending patterns. Exactly how much do you spend each month? Write down everything.

Now that you’ve reviewed your spending habits, create a detailed monthly budget. Try to cut everything that is not essential like eating out or unnecessary shopping. The stricter the budget, the more you’ll be able to allocate to your debt. And even though you have debt, also include a savings category in your budget. It’s helpful to save while you are paying off your debts, even if it’s a small amount. 

Only borrow what you can afford to repay 

Paying off your debts is important, but it won’t mean anything if you continue to take on unnecessary debt. Before taking any loans, ask yourself “Do I absolutely need a loan? Is this a good use for a loan? And can I repay this loan comfortably? When will I be able to repay my loan?” You have to consider the cost of interest and fees before taking a loan. Do not borrow unless you are absolutely sure you can repay the loan on time.

Save for an emergency fund

To prevent taking on unnecessary debt in the future, it’s important to have an emergency savings plan. Put away a small amount of money each month into a savings account. Keep it separate from your primary bank account. Use funds in this account before taking on new debt.