why am i in debt?

Most people are in debt at some point in life, but what are some of the common reasons for hitting the plastic or getting a loan?

Loans are given to enable consumers to buy products and services they otherwise could not afford immediately or it would take too long to save for.

A good example of this would be a mortgage - for most of us it would take a lifetime to save enough money to purchase a house outright.

There are also major life events that take place throughout the course of a lifetime which also add extra pressure to income: redundancy, maternity leave, or require specific purchases.

To some extent, the best advice to counter some of these pressures is to save, however this is not always as easy as it sounds!

At least try to consider some of the big life events that are likely to happen to you along the way, and pick some you can plan for financially - every little helps as the saying goes.

Births

One of the big hitters financially - not only in terms of an increase in your cost of living, but also a drop in income as parents take extended leave from work.

Use the nine months pregnancy at try and save as much as possible to cover the cost of cots, nappies, pushchairs etc! Try to make a budget for all the items you are going to need - the total cost may look scary, so work out what the "must have's" are first, then see whether you can also afford to stretch to some of the "nice to have's" too. Remember not to go over budget on those items - stick to it, and you will know where you are. Family often help you out quite a lot when babies come along, especially in the clothing and toy departments, so don't waste too much money on items you will no doubt be given plenty of as gifts.

Marriages

Another big hitter financially - not only for your own wedding, but also if you are a parent of children getting married too.

Think carefully about what type of wedding you both want, and consider that most events can cost three times as much as you first think once the word "wedding" is mentioned!

Hopefully you will have some help from your family with regard to the costs, however there will be some elements you will have to budget for. As before write a list of all the potential costs.

Research honeymoon locations, wedding ceremony locations, reception locations etc. Carefully consider how many people you would like to attend the wedding and the wedding reception. This will take some careful planning and consideration, and no doubt some compromises will have to be made. Once all the planning has begun, use the time between the planning and the actual wedding itself to save! You may have to make some cutbacks in your day to day expenditure in order to find the extra money. In the case of your children's wedding's, once again you will have to carefully consider your budget and discuss with the future bride and groom what their expectations are in order to work out the expenditure.

Your tact and understanding will be paramount - but remember to be clear on what your budget is and not to over spend or borrow unnecessarily.

Education

Whether you opt to educate your children privately or not - you will have to consider various expenses with regard to this over a number of years.

University education is increasingly becoming incredibly expensive, with Graduates leaving with almost crippling debts.

Even in a state funded environment, pressure will be put on your finances to send your children on school trips, purchase equipment, uniforms etc. Clearly one of the best methods of planning for this cost is to start saving as soon as your children are born! Encourage your family members to contribute to these funds through cash gifts for birthdays and Christmas for example.

A savings fund will considerably help towards the various costs associated with your children growing up - from nursery care, to university costs or driving lessons.

Houses

One of the biggest loans you will ever have, and a scary prospect for a first time buyer. You will need to prepare a thourough overview of your income and outgoings to help you understand what kind of monthly repayments you can afford.

The repayments will vary based on the amount of the loan, the size of your deposit and the rate of interest.

Most Estate Agents have Independent Financial Advisors who will help you work much of this out, and who will suggest options open to you with regard to mortgages on offer.

Take your time to consider exactly how much you can afford, and remember the other costs involved with owning a house - are you looking at an old or new property?

Older houses often need money spent on modernisation and general upkeep. Remember you will need to budget for council tax, home insurance, life insurance to name but a few. It is advisable to try and save as much as possible for a deposit, as the more you can put down, the less the repayments will be, and you will usually have more choices with regard to mortgage types.

There are plenty of options out there - with some reseach and sound planning you could save yourself a small fortune!.

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Why am I in debt?