Everyone’s journey with debt gone out of control is going to be terribly unique to them. But the sources may not be as indiscernible as you might think. Whether you’ve been in debt before and you want to ensure it never happens again or you’re beginning to simply see the value of being prepared, it’s a good idea to know the sources of debt and how to nip them in the bud.
Poor money management
Debt isn’t always immediate. Sometimes, it creeps up on you. Usually, this happens because you’ve taken your eyes off your finances a little too much as of late. If you’re unaware of how much is truly going out of your account and how much you have, you can start dipping into your overdraft and find letters about missed payments coming through the front door. Make a habit of checking your bank account online and check out the apps that help you keep track of what you pay and when you pay it. Look at how they fit into a budget too and see how much spending power you actually have each month before you start paying out.
Debt can be useful. If you can manage it, it helps you plan further with your money and builds your credit score. But manageable can become unmanageable for those who aren’t careful. Always consult the budget before taking on new debt, whether it’s a credit card, a new subscription service, or anything else. Keep track of how much you have to pay every single month and have a set amount put aside in the budget dedicated to closing other debts.
Debt isn’t always down to money management, however. More often, in fact, it’s caused by something outside your control. The sudden loss of income is a huge source of financial anxiety. While you still have your income, put together an emergency fund that can support you through 3-5 months of unemployment. As for cases where unemployment isn’t your responsibility, such as accident and injury, read about making a road traffic accident claim. You can successfully claim against others not only to cover the cost of any motor damages but lost income due to an accident as well. This applies to any injuries or illnesses caused by personal, medical, or business negligence, too.
Lack of protection
It’s not just your employment you should worry about protecting, either. There are other aspects of your life directly related to your financial health that need a shield. For instance, your home and your most valuable possessions should all be insured – especially those assets that you have to replace as soon as they’re damaged or broken. That way, you’re not going to always feel the full brunt of the financial implications. Again, the emergency fund can help cover those unexpected costs that you might not be able to insure, so start building it and start protecting your finances.
Of course, you can never future proof yourself or your finances completely. But you can make sure you’re at least protected against some of the worst sources of debt with the tips above. Preparation is half the battle, after all.