What Can Be Done To Avoid Getting In Debt?

Debt is a reality that many people live with day in, day out.

Of course, not all debt is bad – a mortgage is technically a debt account, albeit with a very real goal at the end. However, the word in recent years has become synonymous with those struggling to make ends meet financially, following the worldwide recession, rising unemployment and continued economic uncertainty.


 While debt is something that many of us will have to accept as part of our financial lives, there are steps you can take to ensure that you minimise the debt you accumulate – and that, once you have built debt, it is properly managed and maintained at the lowest possible risk.

Here is a quick guide to how to avoid debt:

Step 1: Perform a financial health check

Most people think nothing of paying £3 every day for our lunch from the supermarket, or paying overdue fees on library books or of signing up to online services we rarely use.

To take charge of your money, you must know exactly what you spend and where.

Write a list of all of your income and outgoings over the course of a typical month, including all rent and bills alongside any leisure spending. Ideally, you may have receipts for your purchases over a period of weeks and can see exactly where cash is going out.

Once you have documented everything – all of your credit accounts, any memberships you have, what you spend on food and petrol throughout the week – you should immediately see if there is a shortfall.

Have you started paying your gym membership on your credit card? Were you late paying a store card off last month? Be honest about everything. If you start overlooking expenditure, it can very quickly build up.

Step 2: Identify essential spending and set a budget

Once you know exactly how much you have coming in and going out, it's time to be honest about what spending is really necessary.

Rent or mortgage payments, food, council tax, gas, electric and other utilities should obviously be right at the top of the list, followed closely by any credit accounts you already have. Next you have spending on food and transport, then toiletries and clothes – then you can see how much you have to spend on yourself.

If you have other costs on your expenditure list that aren't in your essential spending list, you need to ask yourself whether they are really necessary. How often do you use the gym? Maybe you could run outside? And instead of weekly cinema trips, maybe you could sign up to an online film service?

There are plenty of things you can substitute in order to save money. Even something as simple as making your own sandwiches for lunch at work could save as much as £10 each week.

Step 3: Identify expensive or problem debt

If you have already slipped into difficulties with your finances, you have to take control and stop from falling further behind with payments or paying unnecessary late payment charges.

Make sure you have a note of all of your credit accounts and how much you owe. If you are in arrears, speak to your lender. They should be able to arrange some sort of repayment schedule that will bring your account in line and stop any further action.

If you have high-interest credit accounts but have a reasonable credit history, if may be possible to find a lower cost alternative. Many high street credit card providers have 0% interest introductory offers, which could save you hundreds of pounds.

The biggest thing to remember is that even if you have bad habits, it is possible to take control of your finances. Be honest with yourself and take steps to get your money in order and you will find it saves a lot of cash and stress in the long run.