Avoiding debt

Avoiding debt

What can I do to avoid getting into debt?

Keep track of how much money you get in and how much you must put aside for bills, rent and food. It may be helpful to pay your bills by standing orders and direct debits, with payments to leave your account soon after you've received your pay or benefits.

If possible, save some money each month as a general savings plan to cover emergencies when they arise. Revise your budget each time there is a change in your income or circumstances that might affect your finances.

Shop around for the cheapest gas, electricity, telephone and insurance deals. You can compare gas and electricity prices by using the information on the:

Advice on how to switch gas and electricity companies are available on the:

Avoid buying goods on credit as the interest rates charged tend to be high. Even if interest free credit seems attractive, you could end up paying the full interest if you fail to repay the full amount before the end of the free interest period, even if you are only one day late on your payment. If you do have credit cards, pay at least 10% of your balance every month. Avoid running into overdraft on your bank account without talking to your bank, as the fees charged for unauthorised overdrafts can be exorbitant.

When taking out any loans, make sure you understand the terminology used in the loan agreement and the effect of its terms, before signing it. Most importantly, know the difference between secured and unsecured lending. With a secured loan, you are using your house as security and may lose it if you can't repay the loan on time.

Financial health check

The government has made an online financial health check available on the website of the Money Advice Service. Use this to give you an idea of how well your finances measures up.

You can also use the Money Advice Service's online Debt Test, to help you find out whether you are likely to have problems with your borrowing.

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