How to avoid getting into debt

According to a recent report published by the Money Charity, UK households are forecast to owe an average of £84,412 by the year 2022, and in the year 2017, around 276 people per day were recorded as insolvent. Contributing to this rise in debt is the increase in consumer credit lending with a total debt of around £207.5 billion.  Unsurprisingly, many people are turning to services such as Citizens Advice for help and guidance in how to get out of debt.  In the past year, Citizens Advice helped an estimated 30,000 people with their personal credit debts.  To avoid becoming one of these statistics, here are some ways in which you can better manage your money and pay off your existing debts.

Live Within Your Means

Whilst this may seem like obvious advice, this is the most important rule to live by. Unfortunately, it is a rule that is easily ignored.  With society becoming more about instant gratification, it is harder than ever to resist the urge to spend money that we don’t have.  Big brands and their marketing agencies know exactly how to tap into our emotions and they use this to their advantage.  But before you are tempted to splash your cash, ask yourself whether what you are about to buy is a want or a need.  Rather than clicking the ‘buy now’ button, try waiting a week to see if you still want to make that purchase.  Chances are, all the emotions you felt at the time are gone and you are now able to think with a level head.

Apply for an Overdraft

Rather than relying on the fact that your monthly income will cover the majority of your outgoings, the fact is that some months are more expensive than others.  This is why many of us are hit with unauthorised overdraft charges when an unexpected amount is taken via direct debit.  If you think you are likely to exceed your monthly income due to a higher than usual phone bill, or because your MOT is due, speak to your bank to see if you can qualify for an authorised overdraft.  This will avoid you racking up those daily overdraft charges as you try to gather the money to pay it back.  A pre-arranged overdraft limit will enable you to borrow the extra at a much smaller charge.  Even if you don’t use your overdraft, it can provide you with the peace of mind that it is there should you ever need it.

Use Cash Rather Than Credit Cards

Credit cards may seem like the most convenient way to pay for things, but the fact is that this is the easiest way to get into debt.  Of course, having a credit card is a great way to build your credit history, but you don’t want to hamper those chances by missing payments or by not being able to afford the interest.  When you only have cash, you are more likely to spend wisely as you can only use what money you have in your wallet/purse.  If you take the time to work out a budget using a spreadsheet or money management app, you will have a clearer picture of the money you have left over at the end of each month.  Draw this money out and then leave your credit card at home.

Consolidate Your Existing Debt with a Personal Loan

If you already owe money on various different credit cards, store cards, or finance payments, consider whether consolidating them into one monthly payment may be a good idea.  It can be difficult to keep track of what you owe, and this is a sure-fire way for people to miss payments and get into further debt.  If you take out a personal loan totalling the exact amount that you owe to the various lenders, you can pay them all off and leave yourself with an amount that is much easier to deal with.  You can even find companies such as Everyday Loans who are helping those with bad credit to borrow money from as little as £1,000 up to £3,000.  Keep in mind that consolidating your debt is only really recommended if the interest rates do not exceed those of your current charges.

The sooner you learn the different ways in which to avoid getting into debt, the easier it will be to get ahead financially and to begin to grow your own personal wealth.  Don’t fall into the trap of comparing yourself to others and trying to keep up with the Joneses.  Remember to think clearly when making any purchase and buy with your head, not your heart.  The stress that comes with being in debt is not worth the few hours of enjoyment you will get from that impulse purchase.