Finances are one of the most important things to consider in our lives, yet there are many people who are either irresponsible with their money, or who simply don’t understand how to manage it in a way that would work for them. Debt is a reason for a lot of stress for many people, but the good news is that there are ways in which you can avoid getting into debt – and if you do happen to be in debt at the moment, there are ways that you can get out of it, and get your life back on track. The tips in this article should help you to keep your finances in check, meaning that you won’t have anything to worry about.
Live within your means
We all have a lifestyle that we can afford, and ideally it would consist mainly of essentials, with one or two luxuries as treats along the way. People often get into debt because they cannot get the balance right between how much they earn and how much they spend, and as a result of this they may spend on credit cards or store cards, which is a debt that will rise with interest.
There are some reasons that you might want to get a credit card, as regular repayments can improve your credit rating, and they could be good to use for a large, unexpected purchase that you had not planned for in this month’s pay packet. However, credit cards should be for emergency use only, and where possible they should be paid back in full every single month. Credit card companies often increase limits automatically, meaning that you have the potential of spending a lot of money that you don’t have to spare.
Avoid high interest loans
High interest loans, or “payday loans” are designed to help people who need a little money to help them until they are paid. While this may be a reasonable and accessible option for some, as things can happen that we do not expect, there are many who use this as a regular way to get hold of some fast cash, and as a result they have to pay huge amounts of interest. If you have an unexpected payment that you have to make, it is always better to explore other avenues before you take out a loan like this.
Research essential loans
If you need to borrow money – for example for a car or a mortgage – you should never take the first deal that you are offered. The amount that you pay for your loan overall can vary hugely with regards to interest rates and lengths of repayment, so you need to do the maths and see exactly how much money you would be paying at the end of the term. Doing so would mean that you wouldn’t spend money unnecessarily.
If you are already in debt
If you find yourself in debt already, then don’t panic, as there are ways that you can get out of it. Debt does not have to be forever. The first thing to do is to see whether your debts can be consolidated, so that you only owe one creditor at one rate of interest. This is much easier to keep track of, and could mean that you are paying less at the end of the loan term if some of your previous creditors had been charging a higher rate of interest.
Sometimes debt consolidation isn’t enough, and at this point there is the option of an Individual Voluntary Arrangement if you’re in the UK (England and Wales), or a Trust Deed Scotland if you’re in Scotland. These options are open to you if you have £10,000 of debt for a trust deed or £12,000 for an IVA. If you choose to go down this road, you will freeze your debts, and pay one monthly amount that you can afford over either 4 (trust deed) or 5 (IVA) years. At the end of the agreed term, if there is anything that you haven’t been able to pay, the debt will be written off completely.
There are many ways to avoid getting into debt, but equally there are ways in which you can solve the issue if debt should take you by surprise. By being proactive and taking care of the situation, you can ensure that the issue doesn’t get even worse than it already is – so being organised with your finances is well worth the effort.