It’s common to take a look at your finances during the first few months of the year, especially as you may feel poorer after a busy festive period.
It can be easy to fall into a trap of living hand to mouth - this is where most of your income goes: towards bills and other living expenses. If you have little left over at the end of each payday, you may be able to get by for a few months but your finances can easily be pushed over the edge if circumstances change and there is a major expense.
Seek advice from debt charities and find out about any benefits or tax credits to which you could be entitled for low incomes. Also it’s definitely worth considering ways you could boost your own earnings, whether it’s a side-job or making money from your hobbies.
As a couple, you get used to having two incomes coming in. But if you get divorced, your income could well be halved or drastically reduced.
You will have to cope with the major expense of legal bills, especially if the separation gets out of hand and you could also find yourself having to make payments to your ex for maintenance.
This is a good time to take stock of your finances, talk to debt support charities and consider if you need extra sources of work or a new job to bring more money in.
Poor money management
Get on top of your debts before they get on top of you. Look at your bank statements and make a spending diary to work out what you are spending money on and how far your income goes in covering your outgoings.
If you find you are over-stretched, see if you can cut your spending down or assess any savings you could make by switching your energy bills, phone contract or even your mortgage.
Higher cost of living
UK Inflation figures may be low but everyone has their own personal cost of living and it can be easy to fall into a cycle of debt and get hit when bills land on the doormat. Many have also been hit by low wage growth, even if other costs have been falling. The Money Advice Service estimates that 20 per cent of people live on a sustainably low income.
Seek help from charities such as StepChange who can see if you are eligible for any benefits or tax credits.
Overuse of credit cards
Store cards and interest-free credit deals can sound tempting, but if you fail to keep up with repayments or are already struggling with others then it is best to avoid taking on any more debt.
Talk to your credit card providers about a debt management plan and get help from groups like Citizens’ Advice for support on the best way to consolidate all those credit cards.
Losing a job
This is the most common cause of falling into debt, according to the Money Advice Service. The regular monthly salary from a job provides a lot of security and means you know there is money to pay the bills and put food on the table. But what happens if you suddenly lose your job or are unable to work through illness? Can you or your family still pay the bills if one of the earners is suddenly not working?
Keep money aside for emergencies and consider income protection or critical illness insurance products that can provide cover for those times you are out of work.
Falling into debt can sometimes be out of your control, but knowing the causes can help you prepare and get out of the red more quickly.