How To Keep Yourself Out Of Debt
Avoiding debt is probably harder than it sounds, but that doesn’t mean it can’t be done. With the changes and advances in recent technology, for example, online shopping, contactless payments and credit cards, the habits of ours have changed too. We might now think more about wanting the newest thing immediately, as soon as people begin to get their hands on it.
Whereas in the past, people respected the fact you need to save up for it more. Along with this, the popularity of traditional shopping at the store is decreasing as it is a slower way to get things. With so many ways to spend our money so fast, we should be careful when swiping our cards and paying for things.
5 Tips for Avoiding Debt
Here are some of our favourite ways in which will help you when it comes down to avoiding debt:
Control your budget
Creating, controlling and sticking to a budget will help you to stay away from any unwanted debts. One of our favourite budgeting ideas is the 50/30/20 rule. The rule suggests that 50% of your monthly income should be spent on essentials like food and bills. 30% on things you want and the remanding 20% should be saved. This way you will be able to build up a good sum of savings for the future as well as understanding what you can and can’t spend in the present.
Avoid exceeding your limit on credit cards
Exceeding your limit is the last thing you want to do. This will lead to you landing in debt which could affect you very negatively. If you exceed your limit, further charges and interest start creeping up. The fact the limit has been exceeded may also be recorded on a credit file, which could make it harder to get further credit in future. This is because the lender won’t want to give anything to you in case you don’t repay.
Save up! Prepare for sudden expenses
One of the main reasons that people save money is so that if any unexpected payments occur, they have something to fall back on. Saving money is a simple task which you could probably do without even noticing. Using money-saving apps could be a big help if you need organising.
We believe it is best to save some money and put some on the side so you can always take a chunk out for sudden expenses. This is because if you don’t have enough money to pay what you need, you could find yourself with serious money problems.
Overestimate outgoings, underestimate incomings
Overestimating your outgoings means you will make yourself believe that you spend more money on essentials than you actually do. But, it will lead to you having more money left over at the end of the month, the money you didn’t know you had. This is a useful tip if you feel as though you spend too much money.
Similarly with underestimating your incomings. This will make your budget more and then leave you with more money at the end of the month.
Pay off your debts and pay bills on time
If you are already in debt, there is no way to avoid it. But, there are ways to get out. The main way is to almost follow the steps above on how to avoid it, therefore you should hopefully be able to build up a little bit of money on the side to help you repay.
But, one of the best things to do is to pay debts back on time. If you don’t, you will more than likely face worse difficulties which can impact you in the future. It can lead to things like damage to your credit score. This means lenders and brokers might not want to lend to you due to the risk they’d have to take. For more advice on avoiding debt and managing your money, visit the Money Advice Service.