Debt is a word full of negative connotations and is certainly a situation that many people hope to evade. A recent study even reported that three out of four people in debt say it impacts on their mental health, not just their finances. Help and advice on how to eliminate existing debt is abundant but prevention is always better than a cure and so knowing how best to avoid getting into debt in the first place can make for a much less stressful financial life and set you up for a prosperous future.
Be honest with loved ones
Many people spiral into debt because they are too embarrassed to consult their loved ones when things begin to overwhelm them. Opening up and being honest is the first and most important step, as you then no longer need to face financial difficulties alone, armed with the help and understanding of your friends and family.
The same principle applies when you are in a committed relationship. Both parties involved should be made well aware of the others’ financial situation before entering into marriage, as a wedding acts as a legally binding contract that can make you liable for your partner’s debts should they be unable to pay them.
Make a budget
Monitoring your spending habits and keeping track or your receipts over an extended period of time is the best way to highlight where your money is really going and help you make informed decisions regarding your money. This makes planning for the weeks and months ahead a much less daunting task by allowing you to make cuts where you deem them necessary and possible, through setting yourself realistic targets.
When you want to make an expensive purchase such as a television or a car, not being able to afford it in one lump sum does not mean you have to agree to monthly payments or borrow money from a bank. Shopping around for the best deal and then saving up until you can afford it in one payment means you may have to wait a few extra weeks or months until you can get hold of the item but that once you do, it is fully your own and you are not indebted to anyone.
From internet providers to airlines and from banks to phone companies; the list of organisations that try and add extra charges onto their services is ever expanding. While in many cases – such as with the widely publicised PPI – fees and hidden costs can be reclaimed if identified afterwards, it is always best to avoid needing to do so by diligently reading the small print of any contracts and declining any ‘perks’ a business offers you over and above the standard product or service you are trying to purchase.
Avoid unique purchases
Expensive, extravagant purchases such as cars and houses tend to be the ones that we will eventually sell on to someone else. This means that spending money to remodel your home to fit a very particular taste or purchasing a vehicle that is painted in a very lurid colour or kitted out with bizarre extras is not only a drain on resources at the time but will also make them less desirable to the mass market and therefore more difficult to find a buyer for further down the line. Neutral colours and styles are always the easiest to sell.
Do it yourself
Obviously there are certain important and potentially dangerous jobs that require professionals but the more basic tasks you are able to perform by yourself, the less money you have to fork out to fund outside workers. Be it changing the oil in your car or decorating your house, you can pick up valuable life skills and save yourself a lot of money in the process, helping you become (financially) independent.