The detrimental effects of worrying about debt are well known, but by taking just a few positive steps and assuming control over mounting financial burdens, you can get back on track and turn a problem into an opportunity.
With effective debt management, you can stabilise your credit rating, reduce your monthly outgoings and start enjoying a good night’s sleep again, so take a look at the following tips and see what you can do today to start getting back on your feet.
Check your finances
The very first thing you should do to deal with debt is to check your finances. This means looking at your assets, holdings, liabilities, and liquid reserves to understand how you can navigate through this predicament. You’d also want to ensure that your taxes are sorted out so that you do not have to deal with any violations or fines while you’re already in debt. Consider looking up “tax accountant near me” on the web if you don’t already have one whom you can go to for a consultation. Once you’re in the clear, make an assessment of your monetary health, and see what you can liquidate to raise funds. This should enable you to plan out how you can pay off your debts in a systematic manner.
Don’t be afraid to ask for help
Regardless of how far you go, there might come a juncture where you will need help monetarily or personally. Talking about debt can be embarrassing but Feefo reviews of Financial Wellness Group make it clear that discussing money concerns with a stranger can be easier and more beneficial than sharing with loved ones. Professional debt management companies have heard it all, so there’s no need to feel ashamed about your situation – their team members have been trained to offer a compassionate and pragmatic ear. They are also able to talk you through potential action plans that you might not have considered.
Know who and what you owe
This might sound like an obvious tip, but it’s shockingly easy to get overwhelmed and simply lose track of every pound outstanding. It can be very helpful to set up a rudimentary spreadsheet, listing all of your outstanding debts, the current monthly repayments and settlement figures too. By having these figures in front of you, you can motivate yourself to try and save a few extra pounds every month, in order to get some of the smaller debts paid off and out of your hair. Once they are completed, you can start to focus on the larger accounts.
Consider Downsizing
To reduce your debt, consider making lifestyle changes such as downsizing your living arrangements or cutting back on non-essential expenses. This may involve moving to a smaller home or selling assets you no longer need. If you opt to relocate, consider collaborating with a professional moving company or acquiring packing boxes from companies like Happly (you can find more information here) to facilitate a smooth and efficient transition. Professional moving companies can offer valuable assistance with packing, loading, transporting, and unpacking your belongings, saving you time and effort during this stressful period of transition. While making these decisions can be challenging, downsizing can significantly decrease your monthly expenses and free up more money to allocate towards paying off your debts.
Negotiate with Creditors
Don’t be afraid to negotiate with your creditors, especially if you’re facing financial hardship. Many creditors are willing to work with you to set up a more manageable repayment plan, reduce interest rates, or even settle for a lump sum that’s less than the total amount owed. Be upfront about your situation and provide documentation to support your case.
Increase Your Income
While cutting expenses is important, increasing your income can also help you pay off debt faster. Consider taking on a side job, freelancing, or starting a small business. Even picking up a few extra shifts or taking on overtime at your current job can make a significant difference in your debt repayment efforts.
Don’t adjust your outgoings
If you are determined to get your debts cleared as soon as possible and are making headway by clearing some of your smaller outstanding agreements first, don’t see your former repayment amounts as bonus money. Instead, channel any extra funds from clearing debts into overpaying some of your larger ones or those with the most disadvantageous interest rates. If you have been coping with a certain amount of spending money per month, why try to secure more, when you could just pay more of your debt off?
Cut up the cards you don’t need
Keeping hold of credit or store cards after you’ve paid them off is just a needless temptation. By all means, keep your accounts open – if you really need to – but don’t have a card that you can access and use. Cleared accounts can help to get your credit score in a healthy position, so they can be useful, but you need to be sure that you won’t get into trouble with them. Store cards often come with high interest rates, so if you can live without this season’s drops, maybe cut them up and keep a credit card for non-fashion emergencies.
Create a comprehensive budget
It’s time to make a cup of tea and sit down with your bank statements. The only way to really manage and get on top of your debts is to account for every penny that comes in and goes out each month. If you’re serious about being debt-free, you’ll need to use these figures to budget properly, so be prepared to make some short-term sacrifices for long-term peace of mind.
When you know what your income is every month, subtract your minimum payments and see what you have left. Divide this by four and that’s what you have to live on each week. This is when you can start to enjoy the process, seeing how thrifty you can be. Budget supermarkets, such as Aldi and Lidl are a perfect way to save money on your weekly food bills, and try turning the heating down a degree or two, to see a tangible difference in your energy bills. At the end of the month, whatever you have leftover, put into a separate savings account and watch it grow. You can then pay debts off in one and start seeing a real difference to your financial situation.
Don’t fritter away extras
If you come into any extra or unexpected money, don’t simply spend it without thought. Birthday cash, eBay earnings or selling on preloved websites can all generate valuable extra income that can be used to offset pesky debts that are playing on your mind, so try not to immediately splurge on unnecessary purchases. Pop them in your savings account instead, to top up the ‘lump sum’ fund.
Struggling with debt is not uncommon, despite credit card borrowing on the decline in the UK, but the mental anguish that it causes is hard to overcome. By taking control, being totally honest with yourself and seeking out positive steps, no matter how small, you will find that your situation could improve almost instantly.