The causes of debt aren’t solely limited to huge credit card bills or overspending. A big change in your life could turn everything upside down financially, leading to debt problems and financial instability later down the line.
With this in mind, let’s take a look at what could potentially get you into debt and how to prevent this:
Death of a loved one
Funeral costs and legal fees can tip a bank balance over the edge, especially if your loved one has not left a Will to cover these costs and you are the only family member or friend able to deal with them. The average funeral costs £3,702, according to The Money Advice Service, so if you don’t have money like this in your savings account – and not many of us do – you could find yourself getting into debt while still going through the grieving process.
Divorce is never easy, even without the necessary fees involved. Solicitors, lawyers, court fees – all of these can add up and lead to debt problems. If income isn’t split evenly, one party could come out much worse and find it hard to overcome any debt issues they now have.
Cars are a necessity for many of us but we’ve all experienced the horror of breaking down at the side of the road at some point in our lives. If you don’t have breakdown cover, the costs start to add up and, if the problem is a big one, it can cost hundreds if not thousands of pounds to fix.
According to Money Supermarket, most breakdown companies charge a callout fee of £40, and then charge £1.50 for every mile if your vehicle needs to be towed. If you’ve broken down far from home then this can become very expensive. Plus, if you breakdown on the motorway and require the Highway Agency’s assistance, a fee of £105 can be expected before you’ve even got the car off the road!
Redundancy is a scary thought but it happens unexpectedly and there’s not a lot we can do about it. If you find yourself suddenly out of a job, income will be tight and you’ll need to reevaluate your lifestyle and expenditure. Cut backs are inevitable but sometimes they are not enough and loss of income can leave you struggling to pay even your priority bills.
So how can you survive these horror stories?
Set up a savings buffer
A high interest savings account could rescue you from an emergency situation, whether it be something as small as the washing machine breaking down or a death in the family. Having money tucked away for those important moments can take any additional stress away.
Budgeting ensures there is always a little money left over for those ad hoc situations. First, take a look at your current income and expenditure to determine how much you have left over each month. Then set a certain amount for essential expenses, such as the weekly food shop and stick to it, it’s also a good idea to cut out any unnecessary spending such as magazine subscription services or a gym membership you don’t make use of.
Find better deals
Simply log on to a comparison website, key in your details and let them find the best option for you. Switching your energy supplier, savings account or car insurance provider can save you money, which can then be added to that savings buffer, you just need to take some time to research the best deals!
If you are currently struggling with debt it’s important you find a way out, speak to a debt advisor about a debt management solution, ensure your finances are in order as much as they can be and take that first step on the path to financial recovery.