CLOSURES
Avoiding future debt
CLOSURES
Avoiding future debt
Avoiding future debt
Know where your money goes
So far so obvious, but for many people, understanding their incomings and outgoings isn’t as simple as it seems. A recent study showed that more than half of adults don’t know how many direct debits and standing orders they have coming out of their bank account each month.
So just how do you keep on top of everything that’s going on? The best thing to do is to sit down with a pen and paper and list what comes in, and what goes out. Tedious? Maybe. But this is the only way you’ll know how much room you have to manoeuvre.
Take note of every payment you make, from priority bills like your mortgage or rent payments, to smaller bills like TV subscriptions and gym memberships, and add it all up.
The difference between this figure and your monthly income is your disposable income. This money is yours to spend entirely as you wish, but you should always be cautious when spending to make sure you have a little extra cash should you face an unexpected payment.
Reduce your outgoings
Every year, people in the UK waste £25billion on subscriptions they don’t use. You can avoid this unnecessary drain on your finances by taking the time to study your outgoings and ask yourself how necessary they really are.
Be ruthless. When was the last time you actually used your gym membership? Do you really need a phone contract with unlimited calls and unlimited data? Could you choose one of either Netflix or Amazon Prime and get rid of the other?
A little goes a long way when it comes to reducing your outgoings – saving even £10 per month could really help your ability to save some extra cash and put yourself in a better position to avoid debt in the future.
Increase your income
This might sound like a luxury. After all, who wouldn’t want to bring in more cash when given the option? But if your current level of income has you concerned about dropping back into debt, it might be time to consider ways of supplementing what you earn.
There are any number of ways to bring in extra cash, from short-term options like selling unwanted possessions online, to longer-term solutions like taking overtime in your current job, or even pursuing a new position that pays better.
If you are looking to take up a new job that involves retraining or upskilling, however, you should be wary of any costs involved – it’s important not to let an immediate goal jeopardise your long-term financial stability.
Save what you can
Once you have completed the payment term for your Trust Deed or DAS, your money becomes yours again. It’s entirely up to you what you do with any disposable income you have.
If you’re concerned about avoiding future debt, you might want to think about building up your savings. Savings give you a financial cushion should you find yourself landed with costs that come out of nowhere, like getting your car fixed, or an unexpected dental bill.
It’s important to set realistic goals from the beginning. Don’t put pressure on yourself to save huge amounts every month. The best way to build up your savings is to save little and often, adding to your pot gradually so that you successfully reach your savings goals over time.
Create a budget using your disposable income and allocate an affordable amount to a savings account. This will become your emergency; one you can dip into should your income ever be affected in the future.
Be wary of credit - but not afraid
The thought of taking on credit might be the last thing on your mind as you reach the end of your arrangement. Why would you work so hard to pay off debts, only to take on more?
The reality is, the only way to improve your credit rating is to take on new credit.
This might seem odd, especially if an overreliance on credit was the reason for your financial difficulty in the first place. But credit isn’t something to be afraid of if you spend responsibly.
A good place to start might be using a credit builder card. These are cards designed to help people with little, or no, credit history. Credit builder cards offer you a safe way to pay off your bills each month while gradually improving your creditworthiness.
The limits are low, but the interest rates are higher than standard credit cards. According to the Money Advice Service, you’ll typically be paying more than 30% in interest a year, so it will be important to pay balance each month to avoid getting into debt.
Talk to an expert
Successfully paying off your debts takes hard work and discipline. You should be proud of how far you’ve come, but your journey doesn’t stop there.
Carrington Dean has offered advice and support to thousands of people working their way back to financial security, and we pride ourselves on our ability to provide debt solutions tailored to you and your specific financial situation.
From offering budgeting advice, to helping you find the best deals on utilities, insurance and even credit cards, our experts are on hand to offer guidance on how to manage your future finances and stay clear of debt for good.
What is your financial goal?
