Watch this online session around managing your debt and then work your way through the tips below to help stay out of debt:
Top tips to budget and help keep debt down:
Staying out of debt is simple in principle – just don’t spend more than you can afford. But with so many temptations, it’s a little trickier in real life. Always ask yourself, ‘do I really, really need this?’ before you buy.
Look at what’s coming in and going out to see if there’s a way to cut down your spending. A budget, however simple, can prevent over spending and once mastered, it can really pay off.
As well as helping you stay on top of money going in and out, it can also mean you’re less likely to get caught out by unexpected expenditure, and will be in a better position to boost your credit rating.
Try out the Money Advice Service’s budget planner as a starting point.
A good credit score - also known as a credit rating - is crucial because it can affect your ability to borrow money or get access to credit cards or loans.
Using your credit score, lenders will decide whether you can have a phone contract at a decent price, finance a car or even shop with ‘buy now, pay later’ benefits.
You can check your score for free with credit reporting agencies like Experian or Equifax and also it’s worth knowing different ways to improve your score.
Whichever you choose can affect your spending for a long time. If you save, you’ll have less money to play with before you buy. If you borrow, you’ll have less money to play with after. Saving probably won’t get you into trouble, but borrowing can if you struggle to pay back the money. So, saving is the safer option but it means you can’t have what you want ‘now’.
If you ever borrow money, you must check the interest rate (APR). That’s the percentage you’ll be charged on the total you’re borrowing. Interest rates vary hugely, but the lower they are, the better. So ask yourself, can you really afford that much extra on top of what you’re already borrowing?
If you have a credit card, you can often switch to another provider with a lower interest rate. Shop around and compare APRs. Sometimes you may even be able to find one with 0% for a set period of time. But remember, it won’t last forever. At some point you’ll have to start paying interest. So, if you are going to switch, make sure you pay off your debt during the 0% period.
A smart way to stay out of debt is to always put a little aside, just in case you need it in the future. Even squirreling away £5 a week will save you £260 in a year. And if you put that into a savings account it will grow even more. Get to know 34 simple ways to save.
If you do find that you’re getting into trouble – don’t ignore it. Get advice from a free, independent debt advice service, such as the National Debtline or the Citizens Advice Bureau. You can speak to trained people and talk to in confidence about your situation.
