Out here in the burbs life can really be a struggle. We may not talk about it much, but money can become a big ugly topic. Below is a guest post about how you can stop your family from falling into debt.
The simplest way to stay out of debt is to spend less than you have coming in every single month. Clever budgeting also means you can put money into savings.
Savings could be really helpful if your income was suddenly cut (perhaps if you lost your job) or if you needed more money for an unexpected expense (like fixing your car, or a new arrival in the family).
How does someone fall into debt?
If you spend freely, don’t plan for the future, buy on impulse and don’t worry about unnecessary expense, you might end up borrowing money to fund your lifestyle. If you’re not careful, you could fall into the dreaded ‘debt spiral’ by living beyond your means.
The debt spiral – it could work like this…
1. Spend more than income.
2. Borrow for lifestyle choices.
3. Have to make debt repayments so have less free money.
4. Borrow more money to maintain lifestyle.
5. Debt repayments begin to creep above 50% of income.
6. Struggle to make debt repayments.
7. No longer able to borrow money.
8. Very little money free to spend as it is all servicing debts.
9. Real possibility of falling into arrears with important bills such as mortgage / council tax / fuel.
10. Possible home repossession and / or court action.
It can happen to anyone, rich or poor, because it’s all about how much you borrow compared with what you can afford to repay.
How can I stop that happening?
The debt spiral is quite scary because it’s easy to see how someone might get into that pattern of behaviour.
Do you see your own situation in the debt spiral? If so, you should look into budgeting now – whatever stage you’re at. You can get help from friends or relatives or, if you don’t want to ask them, you could talk to a professional.
Look at the debt spiral – are you making any of these mistakes? Budgeting won’t solve every problem in everyone’s situation, but it can help you to take control of your financial situation and begin planning for your future. Talk to a professional and you could also get some useful tips on how to manage your finances more effectively.
Disclosure: This is a sponsored post.