Statistics about consumer debt are always popping up in the media and with over £1.5 trillion owed by individuals in the UK as of last year there’s no wonder it’s a talking point.[1a]
Consumer credit is up to £207 billion as of December 2017, with research suggesting per household this is £2,567 of credit card debt. [1b] But the easy availability of products like credit cards, with low minimum repayments but high credit limits, make it all too easy to become trapped in cycle of debt.
A shocking 276 people are declared insolvent or bankrupt every day. [1c] So it’s never too early to reassess our attitude towards debt.
Borrowing money isn’t necessarily a bad thing, but if you find yourself borrowing to pay your monthly bills – and that includes using your credit card or dipping in to your overdraft – that’s not going to be sustainable in the long run.
So how can you burst out of the debt bubble? Here are five rules to live by that can help you take control of your debt:
1. Borrowing and bills.
We believe you shouldn’t borrow money to buy something that doesn’t last as long as it takes to pay for. So, borrowing to buy a new kitchen could work well, but try not to take on debt to pay this month’s gas bill, which should usually be covered by your income.
2. More than the minimum
If you really are serious about getting out of debt, you should really try to pay more than just the minimum amount needed on your credit or store card every month, even if it’s just by small amount. Pay as much as you can realistically afford.
3. It’s best to budget
Set yourself a budget by analysing all your outgoings to make sure you are living within your means. If you are getting into debt because you’re spending more than you’re earning, it’s time to reduce your costs.
Maybe take a packed lunch to work, or make your own coffee? Our free OpenMoney app can really help you stick to your budget.
4. Don’t act on impulse
If you have money in your pocket, it can be all too easy to give in to temptation and overspend, but you should always try to plan your purchases and compare prices online to make sure you get the best deal, especially on big ticket items like appliances or furniture.
5. No excuses
If you’re going to get serious about getting out of debt, it’s going to take discipline. A few months of denying yourself some small pleasures will all seem worth it when you can enjoy the peace of mind of being debt free.