How to Keep Debt at Bay

• Start With Small Debts to Help You Conquer the Big Ones

If you have a mountain of debt, studies show paying off the little debts can give you the confidence to tackle the larger ones. You know, like paying off a modest balance on a department store card before getting to the card with the bigger balance. Of course, we generally recommend chipping away at the card with the highest interest rate, but sometimes psyching yourself up is worth it.

• Don’t Ever Cosign a Loan

If the borrower—your friend, family member, significant other, whoever—misses payments, your credit score will take a plunge, the lender can come after you for the money, and it will likely destroy your relationship. Plus, if the bank is requiring a cosigner, the bank doesn’t trust the person to make the payments. Bonus tip for parents: If you’re asked to cosign a private loan for your college student, first check to see if your kid has maxed out federal loan, grant, and scholarship options.

• Every Student Should Fill Out the FAFSA

Even if you don’t think that you’ll get aid, it doesn’t hurt to fill out the form. That’s because 1.3 million students last year missed out on a Pell Grant—which doesn’t need to be paid back!—because they didn’t fill out the form.

• Always Choose Federal Student Loans Over Private Loans

Federal loans have flexible terms of payment if your employment dreams don’t exactly go according to plan after college. Plus, federal loans typically have better interest rates. So be smart about the loans you take out—and try to avoid these other big student loan mistakes.

• If You’re Struggling With Federal Student Loan Payments, Investigate Repayment Options

Just call up your lender and ask whether they offer graduated, extended, or income-based plans.

• Opt for Mortgage Payments Below 28% of Your Monthly Income

That’s a general rule of thumb when you’re trying to figure out how much house you can afford.  And then indulge in some voyeurism and see what other couples can afford.

How to Shop Smart

• Evaluate Purchases by Cost Per Use

It may seem more financially responsible to buy a trendy $5 shirt than a basic $30 shirt—but only if you ignore the quality factor! When deciding if the latest tech toy, kitchen gadget, or apparel item is worth it, factor in how many times you’ll use it or wear it. For that matter, you can even consider cost per hour for experiences!

• Spend on Experiences, Not Things

Putting your money toward purchases like a concert or a picnic in the park—instead of spending it on pricey material objects—gives you more happiness for your buck. The research says so.

• Shop Solo

Ever have a friend declare, “That’s so cute on you! You have to get it!” for everything you try on? Save your socializing for a walk in the park, instead of a stroll through the mall, and treat shopping with serious attention.

• Spend on the Real You—Not the Imaginary You

It’s easy to fall into the trap of buying for the person you want to be: chef, professional stylist, and triathlete.

• Ditch the Overdraft Protection

It sounds nice, but it’s actually a way for banks to tempt you to overspend, and then charge a fee for the privilege. Find out more about overdraft protection and other banking mistakes to avoid.