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Our culture puts little stock in saving and instead provides us with multiple ways in which we can purchase what we want now, and get ourselves into debt by doint so. Loans, credit cards and ‘buy now pay later’ schemes all take preference over saving. It has also been argued More...
that children are not taught how to handle money in school and are ill equipped to deal with personal finance.
With household debt in the UK now at £1 trillion, the figure suggests that a significant part of that debt could have been avoided. Here we will look at simple procedures to avoid getting into debt. There is of course good debt and bad debt. The former could include an affordable mortgage or a low cost credit card only used in emergencies, for example. Bad debt meanwhile could be categorised as a debt that is unnecessary and avoidable, store cards and credit cards used to fund expensive dinners etc. Or a large personal loan that has made repayments a monthly stress.
Write down everything you spend your money on. It will take a little time before you can see where your money is going, but once established it is a powerful tool to not only avoid debt but can also generate savings. A good budget should indicate the areas where you are overspending; after all, it is here the crux of your debt problem lies. Don’t forget to use our debts calculator to help you make that budget.
Once your monthly expenses have been identified, you should be able to determine an annual budget. Simply take all the expenses for the year and add them together.
Add up all the sources of income you expect to receive over the course of a year. Salary minus tax, any other form of financial assistance ie, government benefits, annual bonus etc. Subtract your annual expenses from your annual income.
If the total shows a deficit, you are likely to be in debt by the end of the year, leaving you with two options. Firstly, you can increase your income or secondly, decrease your outgoings.
Either option can be just as difficult, but something has to give. If it is not possible to increase your income, consider the following measures:
1. Resist impulse buys. 2. Eat out less often. 3. Stick to a budget on a night out. 4. Walk to work. 5. Keep a record of credit card purchases or destroy your credit cards all together.
It may be small but the consequences of not reading the small print can be huge. The small print attached to every contract agreement should be read thoroughly. Do not allow yourself to feel rushed when studying the context of your loan agreement. Also, if you have any queries, or wish to make any objections the time to do so is when you are reading the small print.
The small print on a contract agreement is there to protect the lender and enable them to penalise you should the terms of the agreement be breached. In other words, the small print is in place to enable the lender to charge you for breaking the rules, and it is not there to help you.
Restrictions, exemptions and penalties are outlined in the small print. When reading the contents of the loan agreement, pay special interest to the small references such as number, letters or asterisks – any of which can be easily missed. Such references will be linked with a footnote, which is likely to involve some form of financial minefield, which you will certainly want to avoid. Remember, the devil is in the detail. Note: A study by Go Compare found that more than 50% of adults admit to not reading the small print when buying financial products. It is estimated six million consumers face financial difficulty because of their inability or failure to read the small print.
