It’s well known that being in debt can take a toll on your mental health, with a quarter of people in Britain losing sleep each night worrying about their finances.
People will always tell you the same thing: “don’t spend what you don’t have” – but sometimes that can be easier said than done.
There’s no denying that we’re surrounded by the pressure to spend money on things we don’t need every day, making it hard to keep that credit card in your purse or your bank balance out of the red.
Being in debt is complicated – but it doesn’t have to be. Here are some tried and tested tips on how you can avoid finding yourself with debts that are spiralling out of control:
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.
Knowing where you’re at with your money can make a massive difference to how you manage your money. 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; rent, mortgage, council tax and other main bills. You might even want to add in other things 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 to making sure there’s enough left in the bank to cover all of your costs so you can live within your means.
Save – even just a little
Studies have shown that those who save the most money are the ones who put little and often. Putting away a big chunk of your leftover cash each month can leave 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 problem, find a small amount that you can live without.
Budgeting really helps with this. When you understand how much disposable income you have, you can put a little of that into 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 should something happen that impacts your wages or out-goings.
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 out-going 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 the belt this month can save a lot of sleepless nights going forward.
Trim down those out-goings
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 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 give you 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 talk to someone sooner rather than later. Debt has a habit of spiraling out of control if you don’t deal with it as soon as possible, so it’s important not to ignore the problem and tackle it head on.
If you’re reading this and wishing you’d taken some of these steps before you found yourself in debt – don’t worry. Contact us today for free and impartial advice.
We can help you work through your debts from the moment you contact us, and our friendly advisers are trained to give you the best advice possible for your situation.
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