Keeping finances under control can be hard.
The media shower us with advertising promotions for seemingly irresistible offers like cheap and simple to arrange credit, loans, and free gifts with applications.
This does sometimes look good but things can get out of hand if there is not sufficient for everyday living costs because of luxury purchases.
Things like mortgages and car loans are unavoidable in many cases but money lenders, finance companies and retail outlets encourage us to overspend.
Credit are often simple to get hold of but can be a problem to pay off and there is always the temptation to use one to pay the other, creating a spiral of debt.
Although the advertising might say that credit is free, it always has to be paid for. It is commonplace for families to be paying out a thousand pounds a year in debt repayments and this is bound to affect their lifestyle. Many of these people also live from one day to the next without savings.
American bankruptcies for private people have actually gone up be 100% in the past decade and most of the people were employed, but high bills or pay cuts caused their financial difficulty.
In Britain the total of personal debt is around one hundred and thirty billion pounds. There is approximately three thousand pounds in credit card debt, loans and bank overdrafts for each adult living in UK.
Credit card loans have risen by 100% over a period of five years.
Getting out of debt will stop interest payments. If payments on credit cards are increased to a higher percentage per month, the interest will be lower and the debt will be paid much sooner.
Sometimes interest can be saved by changing mortgage companies and fixing interest rates for two, or three years can ensure that you know exactly what you will pay each month, so that you know how much is available to clear other debts.
It can take longer to pay off bank loans and HP agreements because there are sometimes financial fines for paying early. If this is the case, just stick to the agreed amounts per month and don’t add more debt.
There are signals to watch out for that may indicate that you are getting into debt:
• If you find yourself paying for items that you would buy with cash with a credit card.
• Agreeing to further borrowing to deal with other debts.
• If you only pay the lowest required repayment on a credit card.
• Getting red letters in the mail.
• If you have to use money you have saved to pay a bill.
• Selling life insurance policies, cashing them in.
• Having to work extra hours to pay the bills.
• Going into your bank overdraft to pay a bill.
• Only paying debts because you are being pressed to pay them.
• Getting cash advances on credit cards just to live from day to day.
The CAB offers free advice on debt in UK and when you have sorted out ways of paying off debts, saving is important too. Setting up a standing order to pay monthly to a savings account is a good idea.
Generally speaking, don’t get into debt for things that are not vital to your life on a long term basis. A state of the art computer might not be vital, but a car could be. Ask yourself if it is just because you want it, or is it essential.
Look at the things you buy without thinking about them. Buying coffee each day in a coffee shop and purchasing pre-packed sandwiches for lunch can cost a lot of money over a month.
The golden rule is to keep a tally of your spending. Check it before you get a bank statement that frightens the life out of you when it lands on your door mat.
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