Since the global economic crisis began, many of us have been affected by a double hit of falling income and rising prices. Food and utilities seem to cost more every week. Even in the best of times, it’s very easy to make financial mistakes that lead to debts – and once that happens, it can be hard to recover financially. So here is a warning of some easy ways to get into debt …
Let’s assume that you want to start a family. The sensible approach is to plan your finances ahead of time, taking into account loss of income, childcare costs, etc. Failing to do so may mean that you incur debts, especially if you continue to spend as though you were still on two incomes. Always plan for such changes in your life.
Never assume that your income won’t fall - this can be very dangerous. No job is completely secure these days, and if you get used to living on a good salary, you may be in for a shock if you lose your job or have to change for some reason. Don’t be complacent.
This should be a total no-brainer, but there are plenty of people who spend more than they have coming in – this is the fastest route to incurring debts. If you find yourself doing this, take a good look at your finances and make immediate cutbacks before you fall into a hole – or a deeper one.
As I said in point 2, don’t be complacent. Always be ready to adapt your spending if your situation changes, and/or look for ways to increase your income. Don’t dig your head in the sand and pretend nothing’s changed, or your financial situation will – for the worse.
Credit cards can be very useful for emergencies or for giving you protection if something goes wrong with the purchase. However, it is all too easy to get carried away or use them incorrectly. If you fail to pay the balance in full straight away, the charges mount up, and you can very quickly find yourself in greater debt.
Now, I like to think our readers are smart people – you’re reading this site, after all! Still, we all give in to temptation every now and then, and buy something we shouldn’t. Try to think, though, about what matters most, so that you don’t find yourself without enough to pay for the essentials.
Again, this ties in with other points. Taking on too many commitments will overstretch your finances to the point that debt becomes very likely. Just because you can afford something on your present salary doesn’t mean that it will always be affordable.
Not so long ago, people wouldn’t have dreamt of buying anything until they had saved up enough money to pay for it in full. Now, by contrast, with the easy availability of credit and once luxury goods becoming standard items, many people feel that they ‘deserve’ things. This is very likely to lead to overspending on credit cards for items that are not necessary.
You don’t need to be an economist to foresee that things are going to remain tough for most of us for a long while yet. So we all need to be smart about money and avoid getting into debt. Have you ever messed up with money, and how did you get back into shape?
Top Photo Credit: debtcovered