Avoiding Personal Debt

Avoiding Personal Debt

Nearly everyone who struggles with personal debt problems had no intention of ever overspending on their credit card; as humans we like to think we have a great deal of self restraint, but in reality this is sometimes not the case. We’ve all seen it happen to people, so don’t make yourself the next victim. The best way to do this is by preventing yourself from ever getting into debt in the first place; much in the same way as medicine, prevention is better than cure. It’s very difficult, and sometimes impossible, to get yourself out of debt once it has begun to mount up. However, it’s not all that difficult to keep yourself away from it if you plan correctly.

It’s now very easy to get your hands on a credit card, or take out a loan (or at least it was until the credit crunch hit). It is still relatively easy to get a credit card providing you don’t have a poor credit history, but this doesn’t necessarily mean that you should get one. Decades ago, no one even touched a credit card, people still got into debt but never on the sort of levels that we see today. Some people just keep spending, putting everything on credit and eventually having to declare themselves bankrupt or consider and IVA when they finally run out of credit and their debts have become too high. This is primarily because of the “now” culture that has been created, instead of saving up to buy something, people just put it on credit and hope to be able to pay it back in the future. This is a dangerous game to play as the future is never certain, who knows what financial situation you are going to be in six months from now? Things can change very quickly and running up big debts because “you can” is a very bad idea.

You don’t have to rely on a credit card if you have solid control over your finances. Sit down and make a personal budget, covering all your monthly income and expenditure. Once you have some idea of how much money you have coming in overall, set aside some of it for emergencies (10% is generally a good amount) and some for savings. Once you have done this, you should have some idea how much “disposable” income you have left. It may surprise you just how little you have, which can be depressing in and of itself, but instead of ignoring this problem, look for solutions. Try to cut down on your expenses; even just saving some money on your phone contract could help you save over £200 a year. You may have originally thought that the amount you spent on food could not be cut, but start looking around for offers in the supermarkets and you’ll be amazed how much you can save. If you think you are wasting food, try to figure out what is being wasted and cut back on that.

Sticking to your budget can be just as hard as drawing it up in the first place. Try to make sure you stay on track at all times, even if that means writing out any expenditure at the end of each day. Make sure you not any unplanned expenditure or income so you can adjust your budget accordingly. It is absolutely vital that you don’t become complacent, so try to think of the advantages of staying within budget; even just keeping good control over your finances can be a joy in itself.

If you really must make use of a credit card, make sure you choose one which will suit your financial situation. Avoid any hidden costs that often come with low interest cards, and make sure you compare various cards online before you dive in and get one. Read all the small print so you know exactly what you’re getting involved with, if it sounds too good to be true, then it probably is. Also, seek advice if you need some help with your finances, don’t be afraid to ask a professional if you feel overwhelmed.

see also debt management plan.

see also bankruptcy or iva.

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www.tenable-solutions.co.uk
www.pure-financial-management.co.uk