How to live on credit without falling into debt

Do you have relatively decent income but still have many loans and for some reason you cannot repay all of them on time? You might wonder where all the money goes and why you are always out of money at the end of the month. Are you watching enviously friends that have the same income but live on their own home, drive a new car and travel all the time, wondering what is wrong with you? Here are some possible answers.

A lot of debt?

An average middle-class person with healthy finances might have a mortgage, a car loan, a personal loan and a few credit cards and still not have any serious financial or debt problems, even if his total debt amounts for hundreds of thousands of dollars. However, if you have 3 credit cards, a personal bank loan and a few moneylender loans, this might get you into trouble despite the fact that your total debt might be for just a few thousand dollars. How can this happen?


Many people are actually scared of credit. They might have stable income but would rather save for years until they have all the money needed for an own home, instead of buying a home with a mortgage. However, saving money for years is not very effective. Many people spend their whole lives renting instead of buying a home. A few years later they might find themselves without a regular income and without any valuable asset, such as real estate.

Of course, buying a house is not an easy or cheap thing to do, but if you think your income is stable and enough to pay the mortgage regularly, and banks are ready to finance it, why not try instead of paying rent for the rest of your life? A mortgage is a so-called good loan – a kind of investment that will repay you at some point.

Renting has another major drawback. If you have difficulties paying your rent on time, you might want to take a personal loan. Then you still have a loan but a more expensive and less efficient loan than a mortgage.

We know that not everyone can afford an own home. The point is that, there are many ways to finance your housing needs. Some of them might improve your financial status in the long term and others might get you into high-interest debt that literally “eats” your income and savings.


Are you driving a new car with full insurance and a warranty or do you prefer to drive a cheaper second-hand car? “I cannot afford a new car and its insurance is quite expensive,” you might say. However, having an older car that could break down anytime might get you into a lot of financial trouble due to high maintenance and repair costs.

Here are some things you should think about:

  • How much are you spending monthly/yearly on your car? Consider both the price of the vehicle, the cost of insurance, taxes, maintenance costs (including repairs) and fuel costs. Then check some actual offers for new cars. The vehicle itself will definitely be more expensive than your old car. But it might prove more fuel-efficient and save on fuel expenses and eco-taxes. Also, you can forget about any repair costs during the first 3-5 years because of the warranty.
  • How are you financing your car expenses? Do you take a quick loan every time you need a repair? How much interest do you pay on it? Are you late with repayments sometimes? If this is the case, you might be in trouble. A better decision would be taking a loan secured with your car which will have a much lower interest rate. The worst that could happen is losing your car. And this is more acceptable than getting into spiraling debt with sky-high interest rates, fees and collection agencies chasing you.


Everyone wants to live a normal and happy life, without excessive stress, enjoy leisure time with friends and go on holiday from time to time. Even if your income is modest, it is not impossible to enjoy all these pleasures. You just need to be careful with your financial decisions and be ready to make small compromises if you are still not as wealthy as you’d like to be.

I want the latest iPhone, a holiday in the Maldives and maybe in the Alps in the winter. Well, you probably realize that you cannot have all of these with an average income. But this does not need to make you unhappy. What you can do:

  • You can probably afford the latest iPhone every year, but only this. If you insist on it, forget about holidays, eating out with friends and having other small pleasures. Be happy with your iPhone at home. Another option is to browse smartphone offers and you will find various offers for very nice new smartphones with similar characteristics at much lower prices. It is not impossible to have a nice smartphone without spending all your savings on it.
  • Going out with friends: Socializing is important and you can probably afford dinners out 1-2 times a month. Just do not pick the most expensive restaurant and instead choose a middle-class place where you and your friends will enjoy your time. It is about friends, right?
  • Holidays: There are many ways to go on a holiday without going bankrupt. There are thousands of travel agencies offering holidays everywhere in the world. When you pick your desired destination, try to decide what budget you have available. Then browse for offers online or ask a travel agency. If an offer is above your budget, why not try to organize your trip by yourself? Cheap flights, bus or train tickets and various types of hotels are available online all the time. Try SkyScanner for a flight, then book your hotel through Read a travel guide about your destination and you can personalize your trip without traveling with organized groups to arranged places. Choose what to see and where to eat by yourself and you will be surprised how interesting your holiday may be. However, if you do not want to organize all this stuff and just want to pay and get on the flight, you should be ready to make some compromises – such as a higher price, a similar but lower-cost destination, etc.
  • Clothes, watches, shoes, furniture, etc. Your employer just gave you a bonus and you want to buy something extravagant, like a Prada bag or an expensive watch. Well, this is an option, but there are also other more reasonable ways to spend your bonus. For example, how would a Prada bag make you happy when your entire wardrobe consists of budget brands like H&M for example? Would you prefer to have just one Prada bag or would you be more happy with several new bags, dresses and a pair of shoes from lower-cost brands? If you have outstanding debt, it is a good idea to spend some of your bonus on them and buy something smaller for you. Repaying debts will make you happy in the long term and defaulting on them will make you quite unhappy and more stressed than not owning a Prada bag.
  • Credit cards and moneylenders: They can help you boost your lifestyle and save you a lot of stress but only if they are used responsibly. Stick to the following rule: spend only as much as you can repay. If you have been considering buying a new smartphone or home appliance for some time and you know that you can afford it, it is acceptable to pay for it with your credit card. Credit cards usually offer an interest-free repayment option, typically within 30 to 45 days. So just repay it when you receive your next salary. However, it is not recommended to use credit cards for expenses you are not able to cover in the short term because the interest rates can be very high. Loans from moneylenders are a reasonable choice in some situations. Remember: with credit cards or moneylender loans, late payments may get you into serious financial trouble.

Do not be too proud to ask for help

There are many ways to spend your money. Some of them may make you feel happy and rich despite having just an average income, and others might put you into spiraling debt and make you feel really poor. It is never too late to change the way you are managing your finances. If you think you cannot do it yourself, find a debt counselor and follow their advice.  Looking for help is not something you should be ashamed of. Feeling too proud to seek help is.