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No one wants to be in debt. One missed payment leads to another, and the struggle for money becomes more real before you realise it. Did you know that almost 25% of Brits are losing sleep over their financial situation?

Not all of us are programmed to be frugal with our money, and some of us get more tempted to buy what we really can’t afford. A luxury holiday would be lovely, or a shiny new gadget may seem enticing, but the question is, will this also lead to a rocky road to debt?

So, how can we avoid getting into debt in the first place? A magic money tree would be good but let’s get back to reality as there is not a pot of gold waiting at the top of the beanstalk.

Instead, we will offer you some valuable tips to help you stay out of debt and have a positive and healthy relationship with your money.

Start budgeting

Budgeting seems like the obvious choice to start with first, but did you know that many of us don’t have a clear idea of what direct debits, standing orders or even credit card payments are coming out of our account?

However, having a clearer picture of this information can better manage your finances. Get a pen or paper handy, or even better, download our online budget planner and start working out what goes in and out of your bank account.

It is essential first to collate all your financial information. Access your bank statements, credit card statements or any pieces of financial information and then start getting down to the nitty-gritty.

Make a note of the money coming into your household (this income will also include your partner’s) and then compare this with what is going out. Include every little expense you have, such as your mortgage, household bills and even fuel and travel costs.

When you have worked out your income and your expenses, the money you will be left with is your ‘disposable income’. If you don’t have any disposable income or very little, it is time to re-evaluate your expenses and make some well-needed cutbacks. Cutting back on your expenditure even if you have a healthy disposable income can still be beneficial in the long run. Bringing me to my next point, so read on…

1. Start saving

Thinking about the future, it might sound like I am pitching an advert for your retirement, but when I talk about the future, it is vital to plan even for the short term because often, the unexpected can happen.

Losing your job or even your car breaking down are all unanticipated costs, so it is essential to have emergency savings or what people often like to call the ‘rainy day fund’.

Start by putting a little aside every month or even week, and you will see that piggy bank grow.

A general rule of thumb for an emergency cash pot is to have at least six months of your salary saved up. That is great if you can get to that point, but even if you can’t and are only managing to keep a little, that is still a starting point.

Starting small, setting aside £20 per week, won’t be as overwhelming as a more significant amount. Also, you don’t want to feel too restricted with your spending, as spending wisely with your hard-earned cash is essential.

2. Stop buying what you can’t afford

Keep that credit card in your purse and step away from the designer handbag! Have you often felt tempted to buy something you actually can’t afford? You may feel like you can whack it on your credit card and believe it will pay off itself.

Unfortunately, it doesn’t work like that, but instead, you are left with a credit card bill at the end of the month, which seems too large to pay.

So instead, try this method if you tend to splurge on items you can’t afford. Keep your credit card out of your wallet and in a safe place as it will be out of sight and out of mind. Instead, only use your credit card when you need to use it or when you want to be shrewd with your savings. Check out my next point…

3. Start cashing in on your spending

I could tell you that credit cards are the root of all evil, but that would be a mistake. Yes, misusing credit cards and not paying them back at the end of the month could appear like that; however, some great credit cards offer cashback deals on the money you spend.

Cashback spending cards are great for big purchases. Imagine a credit card offering you 2% back on every purchase? Now, who doesn’t want extra cash for doing absolutely nothing? Spending £20 might not seem like a tremendous amount, but what about a purchase which is a few hundred pounds?

As well as cashback credit cards, sign up to cashback websites. Again, if you’re more of an online shopper, then retailers will reward you with the purchases you have made. This doesn’t only mean rewards for luxury items, but even food shopping and essential items offer cashback.

4. Start to take control of your credit card balances

Credit cards are an excellent way to earn rewards, but it is important to pay the balance off each month rather than the minimum amount.

If you have more than one credit card, it is essential to keep track of how much you are spending on each of them. Nowadays, you can check everything online, so access your online banking statements so you can keep a record of your credit card balances. Some companies have phone applications available, offering a more convenient way to keep on top of your finances.

5. Stop focusing on your wants and more on your needs

I don’t know about you, but I need sun, sea, and sand. With overseas travel becoming popular again with the easing of lockdown, everyone is ready to pack their suitcases and whisk themselves away somewhere exotic.

However, not everyone can afford the luxury of a holiday. This is when we need to reign in on the temptation to book a holiday that is not financially viable.

Life is all about sacrifices and so if you can’t afford the expense of a holiday, wait, save up the money until you can afford it. There is no harm in delaying that expense until you are more financially comfortable.

6. Stop using your credit card for cash

Credit cards have a sneaky way of making you think you have the money when you don’t. Don’t fall into the trap of using your credit card as cash on hand. Credit cards, especially those with high APRs, can be detrimental to your financial situation.

If you can’t pay your credit card from your previous billing cycle, you will be hit by hefty interest. Interest is money you are just giving away free to your lender, and who wants to give away free money? Not me, and I am pretty sure you don’t wish to as well. If you can avoid it, don’t use your credit card recklessly and make sure you can pay the balance back in full at the end of the month, or the interest will keep piling up until you are in uncontrollable debt.

7. Stop using too many cards

Generally, if you have a good credit rating, being accepted for a credit card doesn’t take much effort. Before you know it, you have multiple credit cards at your disposal. However, managing them can be a nightmare, especially as most of them come with varying interest rates.

Instead, if you want a credit card, try, and limit yourself to one or two so that you are less likely to lose track of your spending and payments. Also, you are more inclined to know what your credit card bill will be from only one credit card rather than several ones.

8. Start saving on that extra income

When you get a pay rise, you feel rewarded and want to reward yourself. There is no harm in treating yourself as you have worked hard to get it; however, going on a spending splurge is not the best tactic to manage your finances.

Instead, live off your lower wage and use the extra funds to look at savings. If you have managed to survive with your lower-wage until now, I am sure you can continue to live off that wage for the foreseeable future.

9. Start looking for discounts to save cash

We have already touched upon cashback credit cards; however, there are many other options to get rewarded for being a savvy saver—cards where you can collect points for spending money at their shop. Tesco Clubcard and Boots Advantage Card were probably the first companies to offer points and rewards. Now everyone is jumping on the bandwagon.

At one point, my wallet was bulging with rewards or points cards. Every time I was at the till to pay for my goods, I was scrambling around to find the card I needed. Easy peasy! Thankfully, most companies have now introduced apps so you can tap your phone to collect your rewards.

10. Last and final point

Following these helpful tips can sound great on paper, but in reality, it is a lot more challenging to put them into practice, especially if you are not as savvy with your finances. However, you have already accomplished the first hurdle because you are reading this article. It would help if you started small by adopting some of the strategies highlighted in this article.

If you feel you might need a helping hand to manage your deteriorating financial situation, don’t be afraid to ask for help in dealing with your debt problems.

Please speak to our advisors today.

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