This is a collaborative post.
The average UK household is now a staggering £12, 887 in debt, and that isn’t including any mortgages people may have! This is a huge figure, and one that I’m sure must cause a lot of worry for the people who are in that deep!
The unfortunate thing is that it is now so easy to obtain credit that most people don’t think twice about flexing the plastic or taking out a loan when they’re a little short. Then there are the things that people don’t even realise are casing them to sink ever deeper into debt. Things like this…
Not Having a Family Budget
One of the biggest indicators that someone is likely to get into debt at some point in the future is the fact that they don’t have a family budget. Unfortunately, this applies to an ever-growing section of society! Not having a budget might not seem like a big problem and you might think that you’re pretty good at monitoring your own finances, but is that really true? Most of us can easily spend a few pounds here and a few more there without even thinking of it, and although it might not seem like a big deal at the time, over a longer period, these smaller spends can really add up and lead to a serious lack of finances that sends you straight into the arms of the credit card company.
Setting up a family budget, which takes into account all of your incomings and outgoings and ensures that you never spend more than you make, may take a little time,but it’s actually fairly easy to do, and if you stick to it, it will help to keep you out of debt, or at the very least, stop you from sinking ever deeper into the abyss that is consumer debt.
Paying for Your Holiday on Credit
This is something that so many people seem to do without giving it a second thought. Current regulations on the cash lending industry have made it easier than ever to get loans and credit cards, and everyone else seems to be doing it, so it just doesn’t seem like a big deal. However, unless you’re going to be able to pay off that balance at the end of the month, or unless you’re going to be able to pay back significantly more than the minimum each month, that holiday, providing it only cost you £100 (and most family holidays will be significant,y more) could take you upwards of 17 years to pay off! 17 years of repayments for two weeks in the sun?Is it really worth it? No , it really isn’t. If you want to have a family holiday each year, it’s much better to put a little away each week and then choose a destination that you can cover with your holiday fund.
Cosigning a Credit Application
Cosigning a loan application for a friend, relative or even partner who doesn’t make enough money or have a good enough credit score to obtain one off their own back might seem like a nice things to do, and most of us want to help our loved ones out where we can, but it is something that you should only do with extreme caution.
Unfortunately, it is not uncommon for people who struggle to obtain credit to end up defaulting on it when they eventually do. It isn’t their fault, and they don’t usually do it on purpose, but because they’re on a low income, struggling to get by, payments tend to just go by the wayside, and that means that you, as a cosigner end up in debt of your own!
When you cosign for a loan, you are just as responsible for it as the person who is actually getting the cash, and the loan company will come to you for their cash if they can’t get it elsewhere.
Not Being Open with Your Partner About Money
One thing that isn’t often mentioned, but which can often lead to a person getting into deeper debt than they can handle is being secretive about money and keeping things from their partner and vice versa. You see, if you have joint accounts or joint debts and one of you spends more money or takes up more debts that you’re willing to admit to, it will affect you both, and if you aren’t both clued into the picture, well you could start doing things that you wouldn’t if you knew and that could make your debt situation even worse.
I know it isn’t always easy to broach what can be a difficult subject, especially if you’ve argued about money in the past, but it really is the smart thing to do if you want to avoid building up bigger debts and being liable for money your partner owes, which you didn’t even know about further down the line. Being honest about money is also the measure of a truly strong and stable relationship and if you can’t even do that, well what does it say about the rest of your life together?
Letting Your Kids Rule the Roost
When you’re a parent, you experience an intensity of love that you never thought possible; you dote on your children, and you want to give them everything their heart desires, but you really shouldn’t. There is nothing wrong with treating your kids from time to time, spoiling them even, but you shouldn’t give into their every demand, not only because it could cause a drain on your bank balance and a slow descent into debt, but also because kids need to be told ‘No’ once in awhile. For their own good, they need to know that they can’t have everything they want, lest they become spoiled, entitled and unable to deal with all of the little knockbacks we have in life.
Funding a Business Via Debt
Okay, if you’re serious about starting a small business, there’s probably no way of getting around the fact that you’ll need to take out one or more loans in order to do so, but you should be very careful about this because if your venture doesn’t succeed, you could be thrown hurtling into a whole heap of debt that you find it difficult to climb out of.
That’s why, before you approach the bank for a loan, and certainly before you sign on the dotted line, you should conduct lots of market research to ensure that your business has legs, cost your business in detail and draw up a strong business plan. If, after doing all of that, you aren’t confident your business will be a success, think about holding off for a while.
Paying Debts with Credit
One thing that seems to be getting more common for some reasons, despite its obvious drawbacks is the process of taking out new lines of credit to pay off older debts. Although this can sometimes work, if you are using a loan to consolidate your debts into a more manageable, lower interest repayment, if you’re borrowing from one credit card to pay off another and taking out short-term loans to ensure that you can make a repayment one month, not knowing where you’ll get the money to pay that or your other debts off next month, you’re heading for trouble and talking to a debt adviser would be a much better strategy for you to take.
Paying interest Unnecessarily
You may think that, if you have debts or you need to take out a line of credit, there is no way of getting around the fact that you’ll have to pay interest, but you’d be dead wrong! Although debt and interest go hand in hand, there are some ways to avoid the dreaded interest. For example, you could apply for a 0 percent purchase credit card should you need some cash in an emergency, and as long as you pay the balance off within the 0 percent period (which can be several months), you’ll have avoided paying any interest.
If you already have credit card debts, you could look into applying for a 0 percent balance transfer card, which although you will have to pay a small fee, will enable you to suspend interest for anywhere up to 40 months, leaving much more money in your wallet and preventing you from getting deeper into debt!
You might be surprised to learn that some of the things you are routinely doing now could be causing your to get deeper and deeper into debt, but now you know where you are going wrong and what you may need to do to change things, you can start taking positive steps to curb your descent into debt and climb back out of the hole you’ve found yourself in. Debt may be a part of life, but it doesn’t have to take over and ruin it! Take back control, start living a more financially stable life and you’ll soon not have to worry about debt at all!