Debt can be a helpful tool, provided that you use it carefully and responsibly. From credit cards to mortgages, borrowing money to achieve your financial goals can be a useful resource to have at your disposal.
In fact, according to Moneyzine, the average UK household has £64,970 of debt, with the average personal debt for British adults sitting at £34,140.
This is constructed from various forms of debt, including mortgages, personal loans, credit cards, and more.
Of course, while it does have its benefits, the issue with debt is that it can also be a double-edged sword if it is not managed appropriately. Finding yourself in excess debt and unable to meet your financial obligations is a real and present danger when borrowing money.
For this reason, debt charity StepChange created Debt Awareness Week, dedicated to the careful and prudent management of debt to ensure that those using it know the benefits and, of course, risks that come when borrowing money.
As a professional rugby player, you may well have some form of debt, whether that is from a mortgage, credit card, or anywhere else.
Regardless of what debt you have, the key is in managing it carefully and effectively. So, with Debt Awareness Week coming up from 20 to 26 March, read on to discover four tips that could help you manage your debt.
1. Never borrow more than you can afford
When using debt to achieve a goal, it is key to not borrow more than you can afford to pay back. Otherwise, this can be the first step towards problem debt, putting a strain on your income as you are unable to afford the repayments.
With certain types of debt, such as a mortgage, your eligibility for how much you can borrow will be assessed on your affordability. As a result, you are unlikely to be offered the opportunity to borrow more than you could actually afford to repay.
That said, even in this case, just because you are able to borrow a certain amount of money does not mean you have to take the maximum loan you are offered. Even if you could theoretically afford the repayments, it might mean cutting back on other areas of your lifestyle that you would prefer to prioritise. That might mean borrowing a smaller amount may be a more suitable choice.
So, not borrowing more than you can afford does not just refer to your income, but also what you can afford while still living your desired lifestyle.
2. Make sure debt fits into your wider financial plan
In a similar vein to borrowing what you can afford, it is also sensible to check that the debt fits into your wider financial plan. In other words, you need to make sure that the debt you use to achieve certain goals will not prevent you from reaching ambitions later on.
For example, imagine that you have a goal to fully retire by the time you turn 55. In this case, it might not be sensible to take out a 25-year mortgage if you are 35 or over, as otherwise you will have to fund the repayments from your retirement savings.
Debt is often a long-term undertaking, so make sure that whatever you borrow fits into your wider financial plans for the future.
3. It can be sensible to prioritise high-interest debt
When it comes to paying off debt, it is often most sensible to prioritise clearing high-interest loans over anything else. This is because of the effects of compounding interest, in which you end up paying interest on interest of your borrowing over time.
MoneySavingExpert offers this example: if you borrowed just £3,000 on a credit card with an interest rate of 21.9% when you were aged 21, and you only made the minimum repayment each month, it would take 28 years to pay it off.
You would actually pay almost £4,790 in interest alone in this period, more than one-and-a-half times the original amount you borrowed.
For you, this would be the equivalent of borrowing money right at the start of your pro career, only for this debt to hang over you well into your second career beyond playing rugby, and perhaps even into your retirement. Obviously, the effect of this is magnified the more you borrow.
It may be a prudent course of action to avoid high-interest debt as far as possible and, if you ever do need to rely on it for any reason, aim to clear it as quickly and efficiently as possible.
4. Speak to someone if you have lost control of your debt
Perhaps the most important thing to consider with debt is to make sure that you speak to an expert if you have lost control of it.
You might think that this will not happen to you. But unfortunately, it is a possibility that you might inadvertently borrow more than you can really afford. Or, you may perhaps experience significant life events in which borrowing is your only option, such as unexpectedly becoming unemployed or too ill to work.
No matter why this happens, be willing to take advice. There can be shame and stigma attached to debt, leading those who are struggling with their borrowing to want to hide it rather than telling anyone else. This could even include your family and friends.
But often, the better course of action is to actually speak to someone who can help you with practical, realistic solutions.
Whether it involves creating a careful repayment plan or consolidating debt, you have many options for taking back control of your financial situation. In these circumstances, having an expert on your side to help you do this can be a logical way forward.
Get in touch
If you would like help managing debt or any other aspect of your money as a rugby professional, we can help at DBL Asset Management.
Email firstname.lastname@example.org or call 01625 529 499 to speak to us today.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.