How we get into debt - and how to get out

Getting into debt is not necessarily a problem, providing you can stay on top of your repayments. However, when those debts become unmanageable, they can be a big source of worry.

Of course, the best way to avoid debt problems is to avoid activities that can cause debt in the first place. If you do find yourself struggling, though, there are a number of debt solutions that could help you get out of debt.

Ways people get into debt

Not budgeting
If you simply spend your money as you go along each month without considering your essential costs, there's a good chance you could find yourself overspending. It's easy to spend money on luxury goods one day, only to realise your phone bill came out the next day, leaving you in the red.

If you create a budget at the beginning of each month, detailing how much each of your main commitments will cost and therefore how much you have to spend on non-essential items, it's a lot easier to maintain control of your finances and stay out of debt.

Over-commitment
You may be able to afford your new mortgage payments, mobile phone bill and satellite TV subscription today, but what about in six months' time? Particularly if you have an unsteady income (self-employed or commission-based, for example), any costs which already stretch your finances could make staying out of debt very difficult if your income is lower than usual.

Ideally, you should ensure that you have some money left over once all your essential costs are covered. If this isn't the case, it may be a sign that your existing costs are too high.

Spending on credit cards
Used correctly, credit cards are a useful source of finance that can help you out of a tight spot, and many cards provide protection against fraud. However, as the APR on credit cards tends to be high compared with other forms of credit, it's important that you repay any credit card debt as soon as possible. Left alone, credit card debt can grow very quickly, and it's often not long before the debt can become unmanageable.

How to get out of debt

Firstly, contact your lenders. They will often be happy to arrange an alternative repayment plan or a payment holiday to enable you to get back on track. If that isn't a viable option, though, it may be time to speak to a professional debt adviser.

A debt adviser can advise you on a range of debt solutions that could help your situation, such as a debt consolidation loan, debt management plan or an IVA (Individual Voluntary Arrangement).