Which approach can help consumers avoid falling into extreme debt?

Establishing an emergency fund and budgeting is an effective strategy for consumers to avoid falling into extreme debt. By creating a budget, individuals can track their income and expenses, allowing them to manage their finances better and prevent overspending. This proactive approach helps consumers prioritize essential expenses, save for future needs, and make informed financial decisions.

In addition, an emergency fund serves as a financial buffer for unexpected expenses, such as medical emergencies or urgent home repairs. Having this safety net reduces reliance on credit cards or loans during challenging times, which can lead to accumulating debt.

Focusing on a combination of budgeting and maintaining an emergency fund assuages financial stress and creates a sustainable financial strategy, thus significantly lowering the risk of falling into extreme debt.