In an age where money is so essential to us it’s really easy to fall into a pit of debt. This inevitably leads to a vicious circle and it’s easy for it to spiral out of control. If you can possibly avoid it, the best thing is not to get into debt in the first place. Being in debt leads to depression, a lack of self-esteem and motivation and having the constant anxiety of people chasing you for money.
There are several traps that you could fall into – we’ll list them here so you know what to avoid and stay out of debt.
Oh how tempting it is to do a big clothes shop in your favourite store and put it all on a store card! Most people have done it – it’s a quick way to get what you want, when you want it. But what you don’t take into account when you are making your impulse buy is just what is involved. Often the interest rates will be through the roof, and your repayment terms could be extremely hard to meet. The golden rule is if you don’t have it, don’t spend it, and so no matter how much you crave those designer jeans, just learn to be patient.
Working on the same principle as store cards, credit cards are a sure fire way to rack up a lot of debt. Little purchases here and there add up to some pretty scary figures after a while, making it harder and harder to meet even the minimum payment, let alone clear it. Avoid credit cards if you possibly can, and if you have to use them then get into the habit of paying off what you have spent every month so it doesn’t get a chance to accumulate.
Many stores offer deals such as 2 years’ interest free credit on large items such as sofas and beds. This is a good deal if you stick to it, but if you go over the two years you could find yourself with massive interest rates to take on. It’s much better to save up for what you want and then buy it outright, otherwise it’s just another bill every month.
Most of us will need to get a mortgage at some time or other in our life, and it’s the biggest debt we’ll ever take on. When choosing a mortgage make sure you find the best deal available and consult with a financial advisor to make sure you really understand the small print. There are lots of different mortgage deals available so make sure you really do your homework before you sign on the dotted line.
Being in debt is totally avoidable; you just need to be sensible. Never make impulse decisions – no matter what you are offered make sure you go away and have a serious think about it before you make up your mind. You’ll find that nine times out of ten you’ll decide that you’ll walk away from the deal when you consider it in the cold light of day. A debt-free life is a happy one!
Gwenn Marshall is a financial advisor with Loan Saver Network. His day job is to help customers with bad credit mortgage and he firmly believes that people should get more money-wise and avoid debt traps that lead to bad credit.