Prepare For Debt Problems

We all know how to party, but that sure can be costly. Here are some tips on keeping your finances in good shape.

My brother once worked in a home for older people. Every hour or so a cheerful patron with amnesia would ask him how many hours he was in for, to which my brother would politely reply that he wasn't doing community service.

However, one time the question came: "How many hours are you in for?" and my brother - who had a mischievous streak in his youth - could no longer contain himself. "1,000 hours," he replied. "1,000 hours!" said the old gentleman, with eyes as big as dinner plates. "What on Earth did you do?" "I beat up an old lady," said my brother. "You did what?" the old man exclaimed, and then walked off choking and spluttering about the young people of today.

An hour later, the gentleman asked again how long my brother was in for, by which stage the mischievous streak had been suppressed and good manners, thankfully, recovered, but not before providing a good anecdote for his equally mischievous friends.

Now that my brother is somewhat older, he has developed a surer sense of right and wrong. What's more, he's a show-off who's just earned himself a first as a mature student. His prankster friends have mellowed too and bought houses, and they're now competing over who can get the best and biggest garden furniture.

Problem is, whatever they're doing they probably all have debts: loans for barbecues the size of elephants, and student debts which, if measured in elephants, would be a modest-sized herd. Their best bet is to cut back on spending and keep switching to the best credit deals they can. However, the best thing the rest of us can do is prepare for debt way in advance. Here are some things to think about.

• If you're thinking of buying giant mammal-sized outdoor furniture, make sure you're not doing it to compete with your friends and neighbours. It's cheaper to get an invite and bring some chicken legs. Better yet, start small and save up for the bigger stuff.
  
  
• If you're paying for something big, use a personal loan or fixed-rate credit card. If you can pay it off within 6 months or so, get a credit card offering 0% on purchases.
  
  
• Get a job! Student debts average £13,500, says the Association of Investment Trusts, but this average is misleading. It's much higher for students who don't work, and much lower for those who do. If you spend an average £80 per month on credit cards - quite low for many students - at 14.9% and you pay off just £5 per month, you'll have credit card debts of £3,369 after three years. If you work for £50 a week instead, you'll have no card debt and an extra £5,100 to spend!
  
  
• If you're a student, you'll struggle to get the best credit card deals, so you should get a cashback card and look to pay off your bill each month.
  
  
• Bear in mind that getting a good loan or credit card deal can be difficult after you've already built up debts.

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