Living Below Your Means: 8 Tips on How to Prevent Accumulating Debt

You might be forgiven for thinking that being in debt almost seems unavoidable when you consider how much of a struggle it seems to just make ends meet. When an unexpected bill crops up, that’s the sort of pinch point that can easily drive you into the red!

One of the fundamentals of good money management is understanding how to take control of your finances and learning some useful strategies that could help you live within your means, even when your financial position is not as strong as you would like.

Here are some pointers on how to try and avoid the prospect of falling into debt!

The importance of budgeting

You really can’t expect to take control of your financial situation without having all the information about your financial situation in front of you.

A good starting point would be to write down all of your current monthly expenses and compare it to how much money is coming in to cover all those costs.

When you are putting all this financial data together on a spreadsheet or down on paper it is vital that you leave nothing out. This means that you need to keep all of your receipts for money spent throughout the money, right down to the coffee you buy on the way to work each day.

All of these small expenses alongside major commitments such as your mortgage or rent and utilities will soon add up over the space of a month.

Once you have a clear list of all your outgoings you can see where you stand in relation to your income and identify where savings can be made if you need to reduce your spending to avoid getting into debt.

Can you afford the house you live in?

You will want the comfort of having a roof over your head and it’s an aspiration for many of us to try and live in the nicest house we can afford.

Buying a house is probably going to be the biggest financial you make and if you end up buying more house than you can afford you will be saddling yourself with a big debt problem.

As a guideline, you should try and spend a maximum of 25% of your income on housing costs. If your mortgage or rent payments exceed this target it is a good idea to see how you can change this situation if you want to avoid accumulating debt in the long term.

Watch your credit card spending

It is all too easy to rack up a sizeable credit card balance without realizing exactly how much you owe across all of your cards.

Servicing these card balances can take a big toll on your monthly finances and debt consolidation providers are often the solution to clearing off what you owe on various cards so that you have just one more manageable monthly payment.

The best solution in the first place, if you want to avoid getting into debt, is to be strict with your card spending and pay any balance off at the end of the month when the statement arrives.

Have a rainy day fund

A major cause of short-term financial stress is when you have to find money for an unexpected bill such as a boiler repair.

Finding extra money in a hurry can soon blow a hole in your budget and that is when some of us resort to expensive forms of borrowing.

If you commit to putting even a small amount of money away in a savings account each month, it will give you a financial buffer and mean that you can pay an unexpected bill without accumulating debt.

Find some extra cash

Another way of improving your financial situation would be to see if you can increase your income in some way.

That might mean taking on a second job or setting up a small business from home that you run on a part-time basis.

If you are struggling to cut down on your monthly expenses it makes sense to try and increase your income as a debt-avoidance strategy.

Consider your insurance options

If you are trying to cut down your expenses it might seem a strange decision to take out an insurance policy, but it could turn out to be a solid way of avoiding accumulating some hefty debt liabilities.

Medical expenses are one of the core reasons for people getting into serious debt and if you don’t have the cash to pay for surgery or treatment you could quickly build up a sizeable chunk of debt.

One way to avoid that scenario would be to invest in insurance that protects you from going into serious debt if you have to find medical costs.

Review your spending regularly

Signing up for subscription services is a regular source of overspending and it can soon become a habit to allow a monthly payment to leave your account for something you don’t need or can’t afford.

There are plenty of us who sign up for something like a gym membership and then let it carry on long after we have stopped going there.

One way of avoiding accumulated wasteful debt is to check your spending each month and cut out things you don’t use or need or can’t justify spending on based on your current income.

Take cash when you go shopping

A good way of rediscovering the true value of money is to convert to cash for a few weeks.

Buying your groceries or other shopping using a card can often make it easier to overspend. Work out a weekly budget and take that amount in cash and then leave your cards at home when you go shopping.

It should make you far more cautious with your spending when you have to keep within a cash budget and this strategy is an excellent way of learning how to be savvier with your spending.

Follow some or all of these ideas and it could help you to avoid the prospect of building up debt, giving you more of a chance for a brighter financial future.