By the end of August 2015, UK residents collectively owed a whopping £1.4 trillion.
For many, the average debt per household of just over £54,000 can likely be attributed to a secured loan such as a mortgage. For others, it represents a far deeper problem.
Bad debt is cancerous and can cause stress, depression and the breakdown of relationships. It is therefore no wonder that we all strive to remain debt-free.
While not all debt is bad (there is absolutely nothing wrong with a mortgage, after all!), we have five stellar tips for remaining debt-free. It might be easier than you think…
- Perform a personal budget
- This may sound dull and the prospect of turning to a spreadsheet in your spare time something of a chore, but it could be the most important thing you do. List all income and expenditure and see what you’re left with each month. If it is enough to cover living costs and live a bit at the same time – fantastic. If it looks treacherous, take a look at those outgoings and see what you can cut. Be impartial and ruthless – you can do without that sandwich from the bakery every working day, can’t you?
- Pay your bills
- It sounds blindingly simple, but we often need reminding. If you don’t pay your bills, you’ll end up in arrears, and that’s a very bad place to be. If you can’t pay, speak to your supplier (or cut it, if it’s that Sky Sports package you rarely tune in to). Don’t end up like Santa.
- Don’t sit on credit card balances
- It’s tempting. You receive a card with a £10,000 limit. You really want that new sofa. And that 60” curved TV. Oh, and then there’s the washing machine which needs replacing. Never turn to credit if you can’t afford to pay it back in a timely fashion. Credit cards offer superb consumer protection for purchases, but that’s how they should be treated. Pay them off on time each month. And don’t buy what you can do without.
- Don’t worry about the Joneses
- By and large, we’re all of the same ilk. Unless you’re mixing with millionaires, the people in your street are likely on the same footing as you. If one of them parks a brand new Porsche on the drive one day, or you are forced to listen to tales of their fourteen day Caribbean cruise, take it all with a pinch of salt. Do what you love doing and what you can afford to do. You’ll likely be happier than them as a result (how did they afford that cruise, after all…?). You earn what you earn – enjoy it.
- Can’t buy a house? Rent.
- There is absolutely nothing wrong with renting. Getting onto the housing ladder is a great achievement, but it isn’t for everyone. If you simply can’t find the funds to pay for the myriad of house-buying expenses and on-going costs, don’t turn to credit. Find somewhere you love and rent it while you save for that house purchase. Getting those keys to your own place will be far sweeter when your time comes.