How to avoid future debt

Know where your money goes

If you’ve been in an IVA, you have lived by a strict income and expenditure for a number of years to make sure you can afford your monthly payments (which you can track using the Creditfix customer app).

The thought of having free reign with your spending and control of all payments might be daunting. That’s why it’s important to know exactly where your money goes and how much you have left.

Keeping track of your bank balance can seem like a bit of a juggling act – especially as direct debits, standing orders and recurring card payments can take hold of a sizable amount of your monthly budget. However, it’s important to keep an eye on what’s going on with your finances as this will have an influence on how you manage them.

But just how do you keep on top of everything that’s going on?

The simplest thing to do is to sit down with a pen and paper and go through your income and outgoings again.

It may seem tedious, but this allows you to compare how much money comes into your household to what goes out.

Take note of every payment you make. From priority bills such as mortgage or rent payments to the seemingly little payments such as TV subscriptions, leave no stone unturned when it comes to your spending.

The difference between this figure and your monthly income is your disposable income. This money is yours to spend entirely as you wish, but you should always be cautious when spending to make sure you have a little extra cash should you face an unexpected payment.

Save what you can

When you have completed your IVA you will have the opportunity to begin to grow your savings.

This can be exciting and daunting in equal measure so it’s important to set realistic goals from the beginning.

Don’t put pressure on yourself to save a huge amount every month. Although it might be tempting to squirrel away the majority of your cash each month chances are, you’ll only need to dip into your savings in the long run.

Instead make an effort to put a little away as often as you can to ensure that your savings goals are realistic.

Create a budget using your disposable income and allocate an affordable amount to a savings account to create an emergency fund should your income ever be affected in the future.

Be wary of credit - but not afraid

Understandably the thought of taking on credit might be the last thing on your mind as you reach the end of your IVA or complete it.

However, the reality is in order to improve your credit rating you’ll need the help of credit.

This might seem odd, especially as for some credit can be the reason behind getting into financial difficulty, but it isn’t something to be afraid of as long as you spend responsibly.

You may consider getting a credit-builder card. These cards are designed to help people with little, or no, credit history.

Many people use these cards and pay off the bills each month to improve their creditworthiness.

The limits are low; however, the interest rates are higher than standard credit cards so it’s important to spend responsibly. According to the Money Advice Service you’ll typically be paying more than 30% in interest a year so it’s important to try and pay the balance off each month to avoid getting into debt.

Reduce your outgoings

According to research more than half of adults in the UK don’t know how many standing orders and direct debits they have coming out of their bank accounts.

Every year we waste billions of pounds on services we don’t use. Avoid getting caught in this trap by taking the time to study your outgoing and weigh up how necessary they really are.

The key here is to be ruthless. When was the last time you actually used your gym membership? Or have you signed up to a subscription service you don’t use? A little goes a long way when it comes to reducing costs – even saving £10 extra a month can make a big difference to your funds.

Need a little more advice?

We offer advice and support to hundreds of people in your situation every day and are proud to help them make the pound in their pockets go further.

From offering budgeting advice to helping you find the best deals on utilities, insurance and even credit cards, our experts are on hand to offer guidance about how to manage your future finances.