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7 tips to avoid problem debt while you’re young

Posted 12 April 2016

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There are ways to avoid getting into debt when you’re young. We share 7 great tips to stay on top of your finances.

Being young and becoming financially independent for the first time in your life can be an exciting time. However, that financial responsibility may also seem a little daunting.

Last year Citizens Advice warned that it had seen a 21% rise in the number of people aged between 17 and 24 approaching them with debt problems. Meanwhile, research we did into women and debt showed a five-fold increase in the number of young women seeking help with problem debt. So, is it possible to get started in life without falling into a cycle of problem debt? The answer to this question is - yes! And we’re going to show you how. 


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Before we get started, it’s important to say that not all debt is bad – but you do want to avoid relying on credit for everything in life. So here are our 7 tips to sidestep falling into problem debt when you’re young. 

1. Budget, budget, budget.

We’ve put budgeting first as it really is the key to making sure your borrowing doesn’t become a problem. 


The purpose of a budget is to plan how you’ll use your money based on your income. A good budget should allow you enough money to pay your essentials costs and make your debt repayments while also giving you some money left over every month. 


Different people have different budgeting methods. Some people manage to keep everything in their heads if their income and outgoings are pretty much static, whereas others like to keep account of every single penny on spreadsheets. Whatever your approach, make sure you know what you’ve got coming in and going out every month. 


2. Only borrow when you need to.

Whatever happens, you need to be sure that when you borrow you do so for good reason and have a clear plan to pay it back. 


Ideally, you should only borrow when you can’t save up for whatever it is yourself and when it’ll benefit you in the long run. For example, you might take out a loan to pay for a car to get to work, or for a course that will further your career. 


If you’re unsure, imagine how you’ll feel looking back in a few years’ time. Will you be able to see exactly how that borrowing helped you? Will it move your life forward in the direction you want to be going?


3. Choose your method of borrowing carefully. 

It’s not just whether you borrow but how you borrow that can make a difference to your financial future. For instance, it might be better to get a 0% credit card if you know you’re going to be able to pay the money back before the offer expires. This way you might be able to borrow as and when you need to without paying interest. 


Or, it might be possible for you to get help from family and friends and not pay any interest - you’ll also avoid having to go through a credit check. Even with this casual form of borrowing, it’s still a good idea to lay down some ground rules. Our blog Can borrowing from family and friends work? should help you figure it all out. 


4. Make sure you know what you owe.

A big part of being financially responsible is keeping track of what you owe and when you have to pay it back. Put those organisational skills you picked up at college or uni into practise and make sure you keep track of any paperwork you get so you know when everything’s due. 


Get yourself a divider or create a file that keeps track of the details of your borrowing. This way if you need to find a piece of information quickly you know exactly where it is and when everything is due. 


5. Create an emergency fund by saving.

Saving is a great habit to get into and, if you’ve built up an emergency fund, you can dip into that in a crisis, rather than getting into the habit of relying on credit. Don’t worry if you can’t put loads of money into your fund straightaway; the point is that you build it up over time and that it’s there should you need it. Little and often is the key to saving!


This will probably work better if you create a saving goal for yourself. So have a think about how much you’d need stashed away to give you peace of mind (you may need a little more if you run a car) and work towards that goal. 


No matter how young you are, getting into the habit of saving will always stand you in good stead for the future. 



6. Set spending limits on big expenses.

Buying something big and life-changing for yourself for the first time can feel really exciting. But sometimes young people can find themselves in debt because they’ve over-spent on one specific area early on in life. So, if you have a big expense coming up, make sure to set a spending limit. 


Weddings are notorious for turning into very expensive affairs, for example. Maybe you’ve budgeted for the venue, catering and dress, so think carefully about what you’re willing to pay for flowers and a fancy photographer. And how much will the event cost in total if you add it together with the cost of a honeymoon and stag and hen parties? 


When it comes to the big expenses, work out exactly what you need and what you’re able to pay back beforehand. Your future self will thank you for it. 




7. What if I’m already in problem debt?

If you’ve already found yourself struggling to repay what you owe, try to focus on the practical steps you can take to work on the issue, like cutting back on spending or taking on more work. 

Sometimes, it’s as simple as contacting the lender and explaining that you’re having problems paying the money back. Depending on your situation, they may be able to give you a payment holiday or suspend interest and charges for a while. 

If you’ve got multiple debts you’re having problems with and you’re not sure when you’re going to be able to afford your contractual payments again, you could look into a debt solution. Put simply, debt solutions are plans that you make with your creditors that allow you to pay your debts back at an affordable level. 

Whatever your situation, there should be a debt solution out there to help you. A qualified debt advisor, like the ones we have here at Debt Advisory Centre, will be able to guide you to the best plan for your needs. We want to speak to you if you’re worried about debts – just use the options to the left of the page. 

So if you’re young and in debt don’t panic. There’s always a way to deal with the problem - and don’t forget you have time on your side. If you are experiencing debt problems, there’s no reason why you can’t conquer them and build a financially secure future. 


by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.