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To avoid excessive debt, you should apply the following basic strategies whenever you are thinking of acquiring credit:
Productive credit
The best debt is debt that is used on a productive asset, such as a home or business. That asset generates its own income or appreciates in value, and it is from that income or appreciation that the debt can be repaid faster.
Analysis of the economic environment
It can be dangerous to acquire debt when the economic outlook is not good. If you think that your income is going to decrease or that there is a risk of losing your job, it is preferable to stop any debt plan.
Consumer credit with moderation
Obtaining debt to spend on consumption is what causes the biggest problems. If you finance your consumption with credit, try to do so only in emergency situations or when you feel very comfortable paying the installment of that new debt. Remember that consumption should be covered by your income. If you are overusing credit for consumer spending, it may be a warning sign that something is wrong with your finances.