CONTEMPORARY lifestyles are home to a constant tension between elements that pull us in opposite directions.
A student will want to make friends, fit in, and make the most of living on-campus for a relatively brief period of their life, but they also understand that they’re at university to study and gain valuable qualifications to unlock the first chapter of their career.
A working father may be keen to continue striving for perfection at work, but any extra hours put in at the office will take away from precious father-son or father-daughter time they could be enjoying back at the family home.
A cost-conscious single living in the city will want to take advantage of their unrivalled access to theatre, concerts, and nightlife, but over-indulging will leave them with no savings to use to eventually move out into a more spacious property in the suburbs when they want a quieter life.
These are just three examples of how trade-offs between lifestyle and money can play out for different people. I didn’t explicitly refer to money in all the examples above, but if you look under the hood, you will see that the desire to obtain good grades or improve bosses at work is ultimately driven by a desire to earn more money and become financially stable.
Achieving a balance
When we haven’t got that balance right, we may have built up debts. Debt isn’t a bad thing, but it indicates that we have been favouring the lifestyle element of life to such an extent that we have exhausted the readily available cash at our disposal. Most loans will incur a sensible interest charge, and the more interest you pay, the less cash you’ll have available to spend on other experiences in the future, therefore it’s in your interest to ensure that you keep on top of your debts in a sensible fashion and retain a sense of balance.
In Debt Statistics UK Edition, it was revealed that 63% of UK adults had personal debt in 2019, so debt certainly isn’t unusual. It’s the default way of running our complex personal finances.
But how can we ensure that we don’t become one of the 32 mortgage repossession claims made in England & Wales every day in the first quarter of 2022? How can we avoid needing to use the services of Citizens Advice or the Money Charity to help us repair our finances when we feel we have lost control?
The core message of this article is to take on debt with your eyes wide open to the scenario that your borrowing needs may continue to grow in the future. If you can monitor your finances each month, you can satisfy yourself that if things begin to slip, you will be highly conscious of this happening. This will enable you to take affirmative action at an early stage – before debt and interest have grown to levels that make them difficult to deal with.
Proactive monitoring
The mistake many people make is to allow their debts to grow very gradually over a long period of many years until the balance is now attracting enough interest to hamper any efforts to step-up repayments. In effect, they have passed a ‘point of no return’ and may now need to take serious steps such as entering a voluntary arrangement with their creditors to solve the issue.
Keep a budget that clearly shows your ingoings and outgoings each month so that you can keep an eye on whether you have found a healthy lifestyle balance, or whether you are coming up short each month and are funding this through other means.
Just having this data set out will allow you to make choices to cut back or downgrade your accommodation or vehicle to seriously move the dials and bring your monthly deficit back under control.
