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Money, Debt and finance- How to avoid the traps


Money saving tips

by Jonathan Meyer | Pexels


From the start, we have always traded commodities for their perceived value. Whether it be the trading of products, precious metals or currency, commerce has always been an element in life. And in this modern day, it has never been easier to fall into the trap of debt. Student loans, car leases, credit cards, mortgages and business loans all entice you into small monthly payments for a period lasting from weeks to years. These debt spirals are easy to sign up for, and once you have signed, impossible to get out of until you have paid what you owe. Furthermore, with the growing presence of technology, it's never been easier to sign up for these direct debits and without proper observation of your personal finances and knowledge of what you can afford, overextending yourself is a real risk. This report aims to give the reader tips and tricks to avoid and get out of these situations. Here are some of the best tips we have found.



Make sure you know the dangers of credit cards before using them

Credit cards are one of the easiest ways to lose track of your finances. Repayments come with interest if repayments are missed it damages your credit score making future loans and borrowings harder to acquire and come with steeper interest rates. Additionally, credit card companies provide added clauses and added fees in the small print of the contracts, It is common to incur added costs if there is a missed payment or you go over your agreed limit. Ways to reduce the dangers of credit cards is to establish what you can afford to pay back first. Credit cards can be useful when used correctly as they can improve your credit score allowing future borrowing easier, however as we said before if you miss these payments, it goes the other way, damaging your credit score. This makes the importance of paying back what you owe quickly paramount to receiving the benefits of credit cards. If you can't afford it on your debit card then don't buy it at all is a good rule to go by. Additionally allowing a greater payback period allows more time to react to what you have to pay back and get the funds in order.


Limit the number of credit cards you own

Additionally, having excessive credit cards also increases the chances of losing control of your finances. Having many cards active means there are more traps and fees to run into and it can be harder to monitor. It can also lead you to a false sense of security, leading you into overestimating what you can pay back. We would suggest keeping to one or two credit cards maximum, using each for different functions in life, for example, one for food shopping and one for work expenses. This keeps your borrowing under control and measurable with each credit card used for a specific function limiting the chances of overspending.


Have a backup savings account

Having an emergency account allows flexibility for you to react to whatever life throws at you. Although it may seem pointless to have money sitting in an account if you didn't have this available to you the only alternative would be a bank loan. This is the situation you want to avoid as repayments on loans again come with interest further pulling you into a debt trap. Therefore keeping money back, separate from your other savings, reduces the dependency on external finance. This method is more of an insurance policy, planning for the worst whilst hoping to not have to use it. This recommendation also requires you to trust yourself to not touch this money unless truly needed so make sure you can leave this account alone and it doesn't end up being spent in your nearest bar or club.


Make a budget plan and keep track of your expenses

Just spending too much is the biggest risk to your finances. With everything you have to buy just to get by, it can be easy to overspend and lose track of what you have spent. Therefore you should create a budget plan, giving yourself a weekly budget puts your spending into context, showing you a much clearer view of what you can spend in the week and when you need to cut back. Again you need to trust yourself to keep to this budget, lying to yourself that you are keeping to the budget whilst overspending will cause more harm than good. Adding onto this point, keeping a record of what and where you have spent money will allow you to trace your steps back if you are unsure why you are short on money for that week and what you need to do in the future so you can keep to your weekly budget


Keep a routine

Finally, keep to a saving routine. Putting money aside before any spending ensures you are adding to your savings and putting yourself in a better position. Additionally, getting into a routine makes it more likely you will stick to adding to your savings as typically once someone gets into a routine they are more likely to achieve their goal.


Debt is something everyone will have to deal with in their lives so finding effective ways to deal with and manage it are so vital. Good money management, knowledge of debt and how to make it work for you could end up saving you thousands.





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