When you spend more money in a month than you earn, you may find yourself needing loans, credit cards, or an overdraft to keep yourself afloat. While these may work in the short-term, excessive overspending on a frequent basis could see you struggling with mounting debt. This can lead to higher monthly payments, accrued interest on what you owe, and even collection agencies becoming involved if you fail to meet the terms of agreements. Due to this, it can be a good idea to look for ways to reduce existing debt and avoid gaining any more.
How Can I Avoid Debt?
Starting your own savings can be a good way of building up money to use in the future. While you could opt to save for luxury, such as a nice holiday for your family, this money may also help when an emergency arises. From faulty electrics to plumbing issues, fixing problems within your life may not be cheap. Putting money into a Wealthify ISA each month can allow you to start accruing funds that can be used as and when needed.
This money is usually also tax-free, meaning you may not have to pay any charges should it put you over your yearly tax allowance. The use of an ISA can also be simple for people of varying incomes, as you don’t need to put a set amount aside each and every month. This can allow you to then deposit an amount that is affordable, based on your budget.
Choosing the right time to spend money could also be quite important. Throughout the year, there are a number of sales on, which could cut the pre-existing costs of certain items. For electronics, you may want to hold off until Black Friday, or Cyber Monday, as these can see extensive reductions.
Shopping in the January sales can also be useful, especially if you want some new clothes. Using these sales, you could purchase gifts and other essentials throughout the year, even if the event you are buying them for is months away. Using coupons and discount codes is also a very good way to save some money.
You may want to be cautious, however, in planning each purchase. Buying something simply because it is on sale, without factoring in making your money last all month, could again see you spiral into debt.
Using cash can also be a positive change that can help you to avoid debt. When paying with notes and coins, you may be more likely to think about your purchase.
While the use of a card can be more convenient, you may not be able to physically see your spending, meaning you could be more likely to go over your budget. When withdrawing cash, you might also want to take note of the machine you use, as around a quarter of ATMs may charge you for the luxury of withdrawing your funds, further cutting into your finances.
Taking steps to avoid debt can help you to become more responsible with your money. In addition to this, you can then stop paying extra interest, and even potentially increase your credit rating!