I have heard "scare stories" of people not being able to find jobs after PhD'ing. Does this happen to lots of people? Is there anyway to avoid this happening??

Whilst it is inevitable that this kind of problem occurs for some people it is probably far less common than you think and really depends on the kind of career you wish to pursue after you graduate. Job prospects are subject specific and you should ask around academics in your subject area, current postgraduates and careers advisers for a proper answer.