How To Stay Out Of Debt
Often we need to make mistakes to learn from them and avoid making them again and, when you've escaped the debt trap you'll want to do all you can to avoid falling into the trap again.
However, even the richest people and companies in the world have some debts. Even if you have plenty of savings, financing a purchase via borrowing might be the right solution at a given time, because of a certain need or individual circumstances.
But the secret to being rid of financial worry, is to achieve the right balance between saving and borrowing, to reach a point where our savings far outweigh our debts, or where we have no debts at all. Slipping back into the red is very easy, especially with credit so readily available and easy to get hold of.
One thing is certain, being in serious debt affects the way we live our lives and communicate. Debt = stress, so it's in everyone's interest to try to stay out of debt or make sure the amount of debt doesn't impact our lives negatively.
So how do we do that?
Stay 'in the know'. Keep an eye on your finances to ensure you don't slip deeper into the red. Figure out a budget that you can work within so you kow exactly what money is coming in and going out, to ensure there is enough money in the pot to make repayments. Use our income and expenditure worksheet here.
Speak up as soon as you feel you are struggling with any repayments. Contact those creditors as soon as you can. They will prefer to work with you to ensure you can afford repayments than have you miss payments and have to chase you, send reminder letters and so on, as a result. It's more cost effective for them and you for them to work with you. The repayment solution - click here.
Open all letters and statements regarding your finances. Never ignore letters and make sure you know if any fees or charges are likely to be added to your account and when, so you can budget accordingly and stay prepared.
Get rid of credit cards or, if you need a credit card, ask your provider to lower your spending limit to avoid temptation of over spending, 'just this once'. Want to change credit card provider? Click here.
Save money whenever you can. From popping your coins into a piggy bank at the end of each day, to setting up a small direct debt to a savings account. If you are managing the repayments of your debts and aren't in danger of falling behind, it's worth working on your savings. You can then use them for those unexpected bills, fines and purchases, for a 'rainy day', or could use them to pay off your higher interest debts. Find out more about saving and borrowing here.
Be patient and set goals. Give yourself manageable bite-size targets and write down what you need to do in order to achieve them, such as clearing half of your credit card balance within the next six months (by saving the money you'd spend down the pub twice a week, or whatever) or negotiating more-manageable loan repayments within the next month, or saving £5 per week for the next twelve months.
Ask for help. There's lots of trustworthy advice out there and much of it is free. From browsing this site, to calling the Citizens Advice Bureau or reading a good book on the subject, there's plenty of advisors to choose from. Browse our list of useful contacts/links here.
Evaluate all debt solutions available, from adminstration orders and repayment plans to IVas, bankruptcy and loan consolidation. You will only then find the right debt solution to suit your circumstances.
Use our Debt Wizard here.
Advice
Advice: How to stay out of Debt
Advice: Manage your Debt
Advice: How to manage your money and get out of debt
Advice: Saving and Borrowing
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