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How to avoid Debt

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It’s well known that being in debt can take a toll on your mental health. In fact, a quarter of people in Britain are losing sleep each night worrying about their finances.

You’ve maybe heard the expression “don’t spend what you don’t have”. We all know sometimes that can be easier said than done.

There’s no denying that every day, we’re surrounded by pressure to spend money on things we don’t need. From alluring adverts and emails to tempting holidays and shiny new household items and clothes, the world makes it hard to keep that credit card in your purse and your bank balance out of the red.

Here are some tried and tested tips to help you rein in your spending and stay out of debt.

Know where you’re at with your money

It’s hard to keep track of exactly how much money you have – especially since Direct Debits, standing orders and recurring card payments can make money disappear from your account as quickly as it comes in.

But knowing where you’re at with your money can make a massive difference to how you manage your finances. Sitting down with a pen and paper to calculate what goes in and out of your bank account is a great way to do this.

Begin by making a list of what money comes into the household, then compare it to what goes out each week or month. Make sure you include everything; your rent or mortgage, council tax and other main bills such as broadband, home energy and any subscriptions. You might even want to add in other expenses that you know the cost of each month such as fuel and travel costs.

When you’ve got your ‘in’ and ‘out’ figures, the difference between the two is your disposable income (the amount left over). How you spend this is entirely up to you, but understanding exactly how much it is goes a long way towards making sure there’s enough left in the bank to cover all of your costs so you can live within your means.

Save – even a little

Studies have shown that those who save the most money are the ones who put money away little and often. Be wary of saving overambition – squirreling away a big chunk of your leftover cash each month can sometimes leave you short later on. This can then mean you have to dip into the savings you’re trying not to spend, making it a struggle to save at all. Rather than seeing saving as a giant commitment, find small, manageable amounts that you can live without.

Budgeting really helps with this. When you understand how much disposable income you have, you can allocate some of that to a savings account.

However, don’t look at this as a fund to take from when you see something you like. Instead look at it as an emergency fund, giving you some breathing space if something happens that impacts your wages or outgoings.

Be wary of credit

It’s easy to think of credit as being the crutch for when you’d like to buy something big or treat yourself. In reality, however, a huge number of people are now turning to credit to just make it from one payday to the next.

While payday loans, overdrafts and credit cards seem like a great idea when you just need to make it a few more days, they’re actually likely to make the next month a lot harder. This is because you’ve now got an extra outgoing to consider before payday arrives, which will only leave you short again the next month.

Try to think about the future when looking at using credit to help you get by. Tightening your belt this month can save you a lot of sleepless nights going forward.

Trim down those outgoings

Research has found that over half of all UK adults do not know how many Direct Debits and standing orders they have coming out of their bank account. As a nation, we waste billions of pounds every year on Direct Debits for things we don’t use.

Hopefully, setting yourself a budget should help you know what’s going out of your account. Once you know what those costs are, try to cut down on things you don’t need to free up extra money elsewhere.

For example, if you’ve got a gym membership you’re not using or a TV service you can live without, it might be time to cancel them. Saving yourself £10 or £20 a month might not feel like a great deal now, but when you add it up over months and years it’s money that is better in your pocket than anyone else’s.

Already in debt?

You’re not alone if you’re having money troubles. The important thing is to deal with it sooner rather than later. Debt has a habit of spiralling out of control if you don’t face up to it as soon as possible, so it’s important not to ignore the problem. It’s time to tackle it head-on.

And if you’re reading this and wishing you’d taken some of these steps before you found yourself in debt, don’t worry. It’s never too late to start dealing with your debt, so contact us today for free and impartial advice.

Our friendly, expert advisers are trained to find you the best possible debt solution for your situation.