Getting into debt can be scary for many people, and also difficult to manage.
So, we’re here to share our top strategies that might help you avoid future debt…
1. Create a budget and stick to it
Although it can feel like a big task, creating a budget can be useful for preventing future debt.
But, sitting down and making a budget is only half the battle. At the end of the day, it’s no use creating one if you’re not going to stick to it, so it’s important that it is realistic.
It might be an idea to think of some ways that could help you stick to your plan. This could be anything from checking your bank accounts every day to unsubscribing from certain mailing lists. Put simply, implement anything you think could encourage you to stick to it.
2. Plan for emergency costs
Always make sure you factor in unforeseen, emergency costs. It can be frustrating when something suddenly breaks and you have to spend a hefty sum of money fixing it.
But if you set aside some money, which allows you to be prepared for emergencies, it will be less stressful than if you had no money set aside. Even a small amount saved every month into an emergency fund or savings account will make the world of difference should a costly emergency arise.
4. Limit the number of credit cards you own
Credit cards can be great for several reasons, but they can make you tempted to spend more than you can afford, particularly if you’re using multiple cards.
Limiting the number of credit cards you own can help reduce the temptation to overspend and will make it easier to monitor your spending. By doing this, you can lower the chance of running into financial problems further down the line.
5. Never miss your credit card repayments
Credit cards are known for having high interest rates if you don’t pay it off in full each month. This is one of the main areas where people can run into financial problems, so it’s always important to make sure you pay the balance in full.
To do this, you must never borrow more than you can afford. One tip is to make sure you’re not spending over what you currently have in or will have in your current account. This is where a budget will come in handy as this will help you understand what you have leftover every month after your essential expenditure.
If it’s not possible for you to clear your credit card balance in full every month, you can use an alternative method to help you avoid high interest rate charges.
One method is using a 0% balance transfer credit card, which is where you move one credit card balance over to another credit card. The purpose of doing this is so that you won’t be charged any interest for a set period, however there may be a one off fee to do this. Therefore, if you are currently not clearing off an existing credit card balance in full every month and are also paying interest, it could be worthwhile transferring the balance to a 0% balance transfer credit card. It’s important that you don’t become reliant on this, as it can lower your credit score if you’re regularly opening up new credit cards and also the 0% interest rate will come to an end.
5. Focus on essential purchases
This tip seems like a simple one, but in reality, it can be hard to stick to.
It’s also not to say you can’t have a splurge every once in a while, but you must be conscious about how often you spend money on things you don’t need. If you’re spending lots on unnecessary items, it might be worth reconsidering your purchases.
One thing you could do to help yourself is spend some time evaluating your monthly purchases and defining which ones are essential. Once you have a list, you can make these items your priorities when you come to creating your budget.
If you have money spare once you’ve factored these costs in, you can allocate the rest to other non-essential items if you wish.
Shifting your focus to essential purchases may help to prevent you from overspending and therefore avoid future debt.
What happens if I do get into debt?
If you do run into financial problems you may find it hard to navigate, particularly if you’ve got multiple debts.
First of all, it could be worth speaking to your existing lender or debt advice charities to discuss your options and see what might be available to you.
After this, another tactic that might help you is consolidating your debts into a single monthly repayment. This is useful if you have multiple debts with high interest rates.
Consolidating your debts may help to lower your monthly outgoings, as you may be able to get a lower interest rate or a longer repayment term.
It’s achieved by taking out another form of borrowing, known as a debt consolidation loan. This will be used to pay off your debts. Some funding solutions that can be used are secured loans or an unsecured finance option.
Summary
Overall, there are a number of different tactics you can use to avoid getting into future debt. It’s important to try and use all of these options to minimise your chances.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
