How to avoid getting into debt?

Nobody wants to be in debt, but many of us find ourselves trying to juggle repayments after taking out a loan or credit card. Credit is a part of modern life for lots of people, but that doesn’t mean you should have to struggle with debt.

Even before the COVID-19 pandemic, the Money Helper website estimated that around 8.3 million people in the UK were grappling with unmanageable levels of debt. To make matters worse, 22% of UK adults also had less than £100 in savings meaning that they were ill-equipped to deal with rising debt levels.

Fortunately, there are many things you can do to beat debt and even avoid it altogether. Here we outline some of the best tips for staying out of debt so you can improve and protect your financial position.

1. Don't spend what you don't have

A surprisingly high number of UK adults live paycheck to paycheck, leaving them with little money left over to buy anything more than the basics. This means that they are more likely to rely on credit when they do need to make a purchase.

Getting into a little debt might not seem problematic, but it can quickly snowball into a far more serious situation. The truth of the matter is that if you’re struggling financially, it may be better to cut out any unnecessary spending and save as much money as possible.

Often this doesn’t mean going without altogether, as there are many simple swaps you can make to reduce your spending while still living life to the full. It could be choosing a budget supermarket, holidaying in the UK rather than abroad, or simply making do with Freeview TV rather than the subscription packages you’ve gotten used to.

2. Use credit wisely

Credit products can make life easier, but only when they’re managed properly. When you apply for a credit card or loan, it can sometimes feel as if you’re wealthier than you actually are.

Using credit often can easily derail a budget and even push you into debt as you feel you can afford more. When used sparingly, however, credit can be very helpful indeed – and it needn’t even be synonymous with debt.

The key is to assess your own situation and only spend what you can afford. If there’s no clear route to repaying a quick loan or credit card bill, it’s probably not affordable to you.

3. Don't buy what you don't need

The simplest way to avoid overspending and getting into debt is to only buy the things you need. More often than not, purchases aren’t essential and so we end up buying things we don’t really need, at prices we can’t afford, to impress people that don’t really matter.

Whenever you’re thinking about making a purchase, consider whether you really need it or if it’s just a luxury that you’d like to have. Take your time, come back to the purchase and try to avoid spending for the sake of it.

4. Understand your income and expenditure

Plenty of people live from month to month, and never really know what they’ve got in their bank account at any one time. The problem is that when you don’t have a good idea of your financial status, you can’t make smart spending choices.

It may sound like old advice, but making a budget really can help you to understand your money and take control of your finances. It’s only when you know how much money you have coming in that you can decide whether something is affordable or not.

It’s easy to get started, too. All you’ll really need to do is create a spreadsheet or even just a list of how much you earn and how much you spend. The more you include, the more accurate your budget will be, and you can then start to take control of your money without landing yourself in debt.

5. Build up an emergency fund

Life’s little emergencies can crop up at any time, from car repairs to needing to buy a new refrigerator. Many people end up using credit cards and other forms of finance for these unexpected purchases, but this could easily push you into debt since saving money is hard enough as it is without having to make extra repayments.

An emergency fund could help you to deal with issues like this, while also improving your general financial stability. Even saving £20 each month is better than nothing, and over time you could build up quite the nest egg to tide you over should you need to make a quick payment or spend out in an emergency.

Some people like to think of this in the same way as paying their bills. Putting a set amount aside each month might not prevent you from living life as usual, but it could make all the difference when you urgently need some money.

6. Spend within your limits

Most people understand credit limits and overdrafts, but what they might not know is that these limits aren’t always fixed. In fact, many banks and companies will allow you to spend beyond your limit and then make a lot of money by charging you extra.

If you find yourself using credit outside of set limits, you could be paying over the odds in charges and high-interest rates. Borrowing money in this unstructured way could even damage your credit score, and can quickly turn small amounts of debt into a much bigger problem.

Staying inside your credit limits can help to avoid these extra charges, and it’s never a bad thing to be conscious of how much money and credit you have available throughout each month.

7. Stop shopping as a hobby

We’ve all heard the phrase "retail therapy". Lots of us shop and spend money because it feels good. Problems can arise, however, when you start shopping as your main hobby.

Treating yourself now and then is normal, but not if you’re spending more and more to feel better about debt. It’s an easy way to get into a vicious cycle, and shopping can be a very expensive hobby!

The key thing to realise is that shopping websites are carefully engineered to make you spend more money. Even browsing can put you at risk of spending cash you don’t have, so it’s best to minimise your time spent on these sites and even to avoid window shopping.

Everybody wants to keep up with their friends and neighbours, but there really isn’t any need to spend beyond your means. Filling your time with constructive activities and hobbies could help you to stop shopping so much – saving money as you go.

8. Check what you're signing up for

Sometimes credit seems too good to be true, and it’s important to always check the terms and conditions of any financial product you sign up for.

Credit cards, for instance, often come with an introductory rate. After a few months or a year, this rate could switch to a far higher one – suddenly increasing the cost of spending on that card.

It’s vital to understand what you’re signing up to as failing to do so could mean you’re getting into more debt than expected.

9. Boost your income

It may be easier said than done, but boosting your income could prevent you from getting into debt. From working more hours, taking on a second role, or even starting a side hustle, there are plenty of ways to make a bit of extra cash that could pay down your existing debt or prevent you from relying on loans and credit cards in the first place.

Increasing how much you earn could improve your financial wellbeing provided that you continue to live within or below your means. Many people struggle with so-called ‘lifestyle creep’, whereby their standard of living improves as their income rises. It’s what happens when somebody starts earning more and begins to spend higher amounts on non-essential or luxury items.

Lifestyle creep makes it harder to see the benefits of an increased income since you might still be spending all of your disposable income or even getting into debt. If you were instead to maintain your current spending habits while increasing your income, you may be able to considerably improve your personal financial outlook.

10. Avoid credit scams

Improving your financial situation is hard enough without the risk of being scammed. Unfortunately, some fraudsters attempt to use personal loans as a way of scamming people out of their hard-earned money – and could even push you further into debt.

There are a variety of constantly changing personal loan scams out there, but some of the most common ones include:

  • Clone firm scams which attempt to replicate the appearance of a legitimate personal loan provider’s website to steal sensitive user data for use in financial and identity theft crimes; and
  • Loan fee fraud whereby scammers contact their targets suggesting that they have qualified for a personal loan. They may then request an upfront fee to unlock the ‘loan’ before disappearing with the money.

Sadly the methods used by fraudsters are becoming increasingly sophisticated, and they often target the most vulnerable people who could struggle with debt the most.

There’s no one strategy that can help you to avoid scams, but there are some steps you can take to protect yourself. It’s worth checking the Financial Conduct Authority (FCA) register any time you deal with a company claiming to offer credit or another financial product or service. You can then double-check that all the relevant contact details match the official record on the FCA’s register.

There’s no foolproof method for avoiding credit scams, but it always pays to have your wits about you when dealing with financial matters. 

What if I'm already in debt?

If you’re already in debt, you may wish to consider the impact of taking out any further credit on your finances. There are lots of things you can do to improve your financial situation and avoiding new forms of credit could give you extra breathing space to pay down what you owe and save some money.

Dealing with the impact of unmanageable debt

If you’re struggling to manage high levels of debt or just can’t cope with your financial situation, there is help available. The organisations listed below can provide you with free and impartial advice:


Check out our 4.8 star rating on Feefo

See more feefo reviews

Straight forward

“Easy pleasant service, quick decision and easy account management.”

Laurissa Marsden

Representative example: Amount of credit: £1000 for 12 months at £123.40 per month. Total amount repayable of £1,480.77 Interest: £480.77. Interest rate: 79.5% pa (fixed). 79.5% APR Representative. We’re a fully regulated and authorised credit broker and not a lender