Before making that big purchase, imagine your full financial picture.

When it comes to being successful in life, adopting a nutrient-dense diet, making your bed in the morning, and paying your bills on time all attribute to establishing healthier habits. The same can be said for your finances-before applying for your very first credit card or making a big purchase, understanding what debt is can attribute to avoiding debt problems before they start. We asked Ann Dowd, CFP, vice president of Fidelity, to share three ways consumers can avoid getting into debt from the start.

woman paying bills with smartphone
Credit: RichVintage / Getty Images

Follow the basic rule of credit.

"It can be difficult to save when a big chunk of your money is going toward debt repayment," admits Dowd. "That's why it's important to have a financial plan in place to avoid getting into the red in the first place." Developing smart money habits is the first step to building a budget-do not charge more than you can afford and, simultaneously, pay your bills on time. Dowd shares that if you do have an outstanding credit card balance, make it a priority to pay it off so you can focus on other responsible financial goals.

Consider your full financial picture.

Certain small steps can have a substantial impact on your long-term monetary picture. According to Dowd, there are three things to consider: Use tax-advantaged accounts like a flexible spending account or a health savings account if you have a high deductible health plan that lets you pay for medical bills using pre-tax money; save enough in a retirement plan to get the match from your employer; and set aside some cash in an emergency fund to cover unplanned expenses.

Invest in a smart assistant.

"With so much going on in the world today, figuring out the perfect amount to save and conducting daily maintenance of your full financial picture might not be a high priority," says Dowd. Consider using an automated platform, such as Digit which uses a smart algorithm to analyze your income as well as spending habits to determine small saving transfers. In other words, let the smart assistant do the hard savings work.


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