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In debt and can’t understand why? Find out here

In debt and can’t understand why? Find out here

Category: Credit cards

Updated: 31/10/2008
First Published: 03/11/2008

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Many of us work long hours in stressful jobs and feel the need to treat ourselves after a hard day at the office but if you get a nasty shock every time you open a bank or credit card statement, you could be in the dark about how much you're really spending.

Read on to see how you could be dragging yourself into debt without realising it - and what you can do about it without giving up the good life.

1. You shop for pleasure

Too many of us see shopping as a kind of sport or leisure activity. Obviously, we all need new clothes or household gadgets from time to time but nobody has to buy new stuff every weekend. Sit down and work out what you really need. Then go out and shop for that one item. You can still enjoy browsing around stores but you won't be frittering away your money.

2. You can't resist a bargain

You love hitting the sales and snap up loads of bargains - but paying £50 for a jacket that used to be £100 isn't much of a saving if you don't need or use it. Are you tempted by two-for-one offers? They're great if you can get two of something that you need to use regularly, otherwise they're worthless. Before you go shopping, make a list of things that you need to stock up on and only allow yourself to be tempted by sales where you know you can get these items cheaply.

3. You take the first deal you're offered

Many people are afraid of haggling but it's actually a very effective way of gaining discounts - and recent survey for CreditExpert, the UK's leading online credit monitoring and identity fraud protection service, found that 57 per cent of us are now more prepared to haggle than we were a year ago. Electricals, white goods, furniture, mobile phone contracts and clothes are among popular targets. One area to consider carefully is financial products such as loans and credit cards - do your research and ask for the best possible deal, or you could find yourself paying higher fees and more interest.

4. You don't know what you can really afford

Do you do the weekly food shop in a high-end deli and buy designer clothes? If so, you need a reality check. Most people in the UK earn less than £30,000 a year and this kind of salary does not support a celebrity lifestyle. One good way to see what you can really afford is to check your credit report regularly. It contains a list of the credit you've taken out, such as cards, loans and mortgages, along with your repayment record, so you can see instantly what you owe and how well you're coping. It could be the wake-up call you need - and it's free to see your Experian credit report .

5. You buy yourself treats

You've had a hard day at the office and you need cheering up. You deserve a treat, so you go for a massage or get a take-away for dinner. This is fine if you're doing it once a month but if it's become a weekly habit, you could be heading for trouble. There are lots of different ways to treat yourself - a nice hot bath with some scented oil, a walk in the park or a delicious home-cooked meal will save money - and cheer you up.

6. You go out too often

You like to socialise and the easiest way to do that is to meet friends in a bar, club or restaurant. It's not so easy to keep tabs on your spending though, especially when you're buying drinks in rounds or splitting a restaurant bill between lots of people. Why not invite friends over for dinner or drinks instead? An entire bottle of own-brand vodka costs about the same as a single cocktail in a bar. Guests will always bring a bottle with them, too, so you're saving money twice over. You can play games, watch movies, listen to music or just chat - sometimes the best things in life are free.

7. You don't take a list to the supermarket

You never seem to have time for a proper supermarket shop, so you pop in every day during your lunch break or after work and buy food for that evening. Big mistake. You always spend more when you're not focussed on what you need, picking up things that catch your eye. Instead, plan your menus and make time to do a proper shop once a week, crossing off items as you go. It's also a good idea to eat something beforehand - if you're hungry you are much more likely to overspend on nibbles.

8. You fritter

It's so easy to spend money without realising - the morning cappuccino, the weekly magazine, the long chats on your mobile, even buying sandwiches in the corner shop. You'll save a lot of money by making your own packed lunch, getting a jar of coffee for the office, making calls when airtime's cheap and looking up newspapers and magazines for free on the internet. It all adds up. A £1.50 coffee every working day equals £360. A £2.50 sandwich a day equals £600. Cutting just those two out saves the best part of £1,000.

9. You've borrowed too much

If you're overcommitted on credit cards or loans, you'll have to repay a lot of interest. And if you don't make those repayments on time, your credit history will record that you're a bad payer, which means that lenders are more likely to charge higher rates in future. If you're in trouble, talk to your lenders - they may negotiate a new schedule of payments that you can afford. You can also use some of the money you're saving with lifestyle changes to pay off as much of your debts as possible. Your credit report contains a useful list of contact details for your lenders.

10. You're lazy about the boring bills

Money is there to be enjoyed, which means spending it on fun – such as holidays and socialising. You forget about the boring things that need to be paid for, like your rent or mortgage, council tax and utility bills – and the final demands can come as a shock. Get all your old bills out to see how much you've actually paid over the course of a year. Utilities are getting much more expensive so it's worth switching to direct debit payments, which are usually cheaper. You could also check price comparison sites for better deals with different providers.

You can see your free Experian credit report as often as you like with a free trial of CreditExpert

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.