How to avoid getting into debt

Struggling with debt can be really worrying, so it's best to avoid getting into debt in the first place if at all possible. Here are a few tips that could help:

Don't spend what you don't have

This is probably the biggest single tip for staying out of debt. You basically get into debt when you spend more money than you actually have - and debt problems can arise if you find that you can't pay it back. So if you want something, whether it's a new TV or a holiday, see if you can save up for it. You may not have enough at the moment, but if you don't need it immediately, just start saving! It can be more rewarding to pay for something with money you've worked hard for, and you won't have to worry about paying it back.

Avoid credit or use it wisely

Sometimes you need to take out a bit of credit to tide you over until the next payday - sometimes it's unavoidable. So if you can't avoid taking out a personal loan, credit card or overdraft, make sure that you can afford to pay it back before you actually sign up to anything. Remember that it will probably charge interest, so take that into account too. Make sure you get the best possible interest rate on your credit, and do your best to pay it back in full in the agreed timeframe.

Understand how much you have

It's hard to understand how much you have - and how much you spend - until you make a budget. Figure out how much you earn each month, then how much you spend on essential costs (like your mortgage or rent and bills). If there's money left over after these costs have been accounted for, this is your disposable income. You can use this how you like, but if you're trying to avoid getting into debt, it's best to be careful with it and try to get some savings put aside for a rainy day.

Look at areas of your budget like subscriptions or eating at restaurants, and see whether you can cut back. This handy budget planner could help you get started.

Don't buy what you don't need

If you think about it, you probably don't really need most of the things you buy. So, before you buy anything, just think about whether you need it. A good way to do this is to wait a while - whether it's an hour or a week - and decide afterwards. If you still really want it after that time has passed (and you haven't found it for less somewhere else), you may decide you can justify treating yourself.

Build up an emergency fund

An emergency fund could be a 'life-saver' if you're hit with unexpected expenses. A car repair bill could push you into debt if you're not prepared, but if you have some money saved up it could really help. To build an emergency fund, just dedicate yourself to putting a certain amount away each month. Even if it's not much, it will build up over time.

Spend wisely

There are loads of ways you can spend less every day, whether it's on food, energy or luxury items. Have a look at our money-saving tips page for more ideas.

What if I'm already in debt?

If you're already in debt you should always focus on paying back what you owe before you consider saving or spending on luxury items.

If you can't meet your current monthly debt repayments - but you could commit to them if they were lower, you might be able to arrange a debt management plan with your lenders. Debt management would allow you to make lower payments over a longer period of time - if your lenders agree.

Your lenders may even agree to freeze interest and charges on your debts. There are some disadvantages, though: for example, making lower payments will damage your credit rating.

If you'd like to know more about debt management, this page has lots more information.

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