Avoiding Debt - The Dos And Don’ts
Avoiding Debt - The Dos And Don’ts
It can only take a minute to get into debt, but it can be a hard and time consuming process to get out of it again. When asked about their debts, most people will say they regret and resent them. Frustratingly for those in debt, many realise that the majority of their debts could have been avoided; it is often the case that people get used to spending on luxuries, causing them to apply for credit and waste thousands of pounds on non-essential items.
If you have managed to get through life so far without running up any debts at all, congratulations, but be careful. Credit is always tempting – who wouldn’t want to go on their dream holiday tomorrow? But, the reality is that the holiday will end up costing you a lot more than you originally thought if you buy it on credit. Borrowing money means paying interest and it is the interest that often catches people out – for example, some credit cards can charge as much as 50% APR and loans can be even more.
In these challenging financial times, many people are struggling to make ends meet and households are suffering from higher mortgage rates, food prices and energy bills. For help on how to protect yourself from the wide economy, read our Top Tips on How to Beat the Credit Crisis.
Fundamentally, it is people’s attitudes towards money that needs to change – the notion of saving for something you want needs to be re-installed and the idea that credit is free needs to be discouraged. If you have been in debt and want to know how to prevent yourself falling into the same trap again, see below for our list of dos and don’ts on how to avoid getting into debt.
Debt dos
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Only get a credit card if you have no real need for one – It sounds backwards, but credit cards should only be used if you can afford to pay them off. They can be useful for cashback, airmiles, internet purchases and paying for things abroad due to the added benefit of insurance and security protection, but only apply for one if you trust yourself. Running up huge debts at university so that you can go to the pub every night is not cause for applying for a credit card.
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Budget – clever spending means your money will go further and there will be no need for extra credit – work out exactly how much money you can survive on and stick to it.
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Save – With savings you can pay for luxuries like holidays without getting into debt and spending the next few years paying it off. Credit cards come in handy in times of emergency, but if you had savings to fall back on then you would have no need to get into debt.
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Keep an eye on your account – check your bank balance every day to make sure you're not exceeding authorised spending, because charges can be more than £30 and soon add up if you overspend.
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Shop around for the cheapest utilities – it is proven you can save money on things like car insurance but it is also worth shopping around for other financial products such as energy, home insurance, and health insurance.
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Read the small print – Knowledge is key, and if you do not know what you are signing up for you could inadvertently end up in debt you don't want.
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Be thrifty – our parents had to and we should to. Make food go further by adding more vegetables, buy clothes in charity shops, and 'make do and mend' instead of buying replacements.
Debt Don’ts
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Don’t get sucked in by 0% interest deals – Read the small print first, as they are usually for a limited period only and if you can’t afford to pay back within that period the interest soon adds up.
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Don’t think that because you have money left at the end of the month you have to spend it – saving just £50 a month will soon add up towards your holiday or a deposit for your first home.
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Don’t spend more than you can afford – this is how most debts start and is a dangerous habit to get into because once you're in a little bit of debt it's easy to justify a bit more.
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Don’t deny yourself everything – if you have some spare cash and really want something then treat yourself and feel good about it as opposed to the guilt you would feel if you had paid for it with credit.
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Don’t let your credit rating slide – be punctual with bill payments and keep on top of your finances, this way when you come to get a mortgage or any other type of lending you will not have any trouble.
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Don't ignore your debts – If you already have debts that you feel are out of control, get help sooner rather than later. Advice and programmes are available to help you get back on your feet.
For FREE and impartial debt advice, fill in the debt advice enquiry form and a qualified advisor will assess your individual sitaution and call you back to help you work out the best course of action.