Large numbers of people in the UK, and around the world, currently live beyond their means. As a result, borrowing money is a reality for millions of us and sometimes it’s difficult to see a way out of a cycle of debt. Whether you are trying to find a solution to your current situation with credit – or to avoid borrowing in the first place – there are other options if loans or credit cards are not the way that you want to go.
Increase your income
The fastest (although not necessarily the easiest) way to avoid borrowing money is to increase your income. This could be something as simple as requesting a pay rise at work. If you’re not successful at that there also other ways to do it. For example, you could take on a second job or work as part of the gig economy, such as driving a taxi or doing some paid DIY on the side. If you have a spare room, renting this out could help to increase your income. Selling items can also be very profitable, whether you do this via something like a garage sale or online through sites like eBay.
Cut back on what you spend
It’s a very simple part of the equation but if you spend less then you may not have such a pressing need to borrow. Make a list of your key expenses every month – mortgage/rent, food, transport, bills – and a separate list of everything else that you spend money on. Your second list is basically all the non-essentials that you don’t necessarily have to keep covering the cost of. Whether it’s clothes or a gym membership, cutting back on these things could give you more flexibility when it comes to keeping your borrowings to a minimum.
Start to keep track of your spending
A budget or spending plan will make it much easier to cut back on what you spend. The more you understand your finances, the more you’ll be able to take back the kind of control that can help you to avoid excessive borrowing. Budgeting is very simple – list your income against your essential expenditure and then make a plan for what you’re going to want to do with what’s left. Planning in this way means that your spending will be considered – and that you can save. If you don’t do this then it’s all too easy to overspend and run out of money, which may mean that you need to borrow.
Just say no
There are all sorts of reasons for borrowing and overspending and many of them are complex. You might be an impulse buyer or an emotional purchaser and that can be difficult to work through in terms of how to get yourself back into a better position. Often, the simplest approach is just to say no to any additional spending, especially if you need to borrow to cover the cost of that spending. It can take a lot of willpower to be tough with yourself in that way but it’s the first step towards clearing existing debts and avoiding getting into trouble with new borrowing.
If you’re considering borrowing to pay for a product or service that is being supplied by someone else – or by a business – it may be worth negotiating. Being able to bring the price of something down may mean you won’t need to borrow as much, or perhaps not at all. Even something like mobile phone tariffs and energy costs can be negotiated, especially if you’ve been with a provider for some time. It’s always worth asking the question when it comes to any purchase or expense because the less you pay for it the more in control of your finances you’ll be.
Ask for help
If you do really need cash and you’re all out of options in terms of how to pay for something other than with a loan, others might be able to help. Family and friends, even your co-workers, might be happy to help you out with a loan if they aren’t in a similarly difficult financial position. If you’re going to do this it’s essential to make sure that you make it clear what the loan is for – and that you’re going to be able to make the repayments on it. Otherwise, you may find that borrowing causes problems in your personal relationships.
Borrowing isn’t the only option if you are in need of some money – from asking friends for help to renting out a spare room there are other ways to cover a cash deficit.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley