Debt can be crippling. It can leave you feeling stressed, depressed, and constantly anxious. The worry that one slip-up could cause you to have your car or even your home repossessed can be devastating.
We all experience money worries from time-to-time. Sometimes financial problems are out of our control. For example, the banking crisis a decade ago had a severe knock-on to many households all over the world and this was not necessarily due to individuals being financially irresponsible, but flaws in the political and financial institutions that govern the way that we could borrow money. A crisis such as this can leave many people in difficult situations.
But pulling yourself out of a financial black-hole may seem impossible when you are faced with the immensity of the problems, it is, however, entirely possible to get yourself back onto stable ground financially but it will take time and effort, and it will require you to take a good hard look at your own relationship with money and admit your weaknesses.
Acknowledge The Problem
Burying your head in the sand is often the easiest option when it comes to debt. The hope that it will all just go away on its own is not helpful at all. Being realistic about the situation will allow you to formulate plans better and manage your own problems.
Admit to yourself that you have not managed your finances well and acknowledge the fact that you may need help and advice from a debt charity such as debt.org.
Review Your Debts
When we turn a blind eye to our rampant debts we often lose sight of where we are with them. But it is important to take full stock of your situation before you make a plan of how you are going to make changes to the way that you look after your money.
Find out exactly how much you owe to every lender and what the interest rates are on each debt. If you have missed payments, find out how many you have missed, and how long ago these were.
Prioritize The Right Debts
Some debts may be bigger than others, but the ones that you should really worry about are the high-interest debts. If you have ever taken out a payday loan, then you should check out the interest rates on these as they can take your breath away.
Credit card interest rates are typically considerably higher than those of loan or overdraft debt.
It is important that you go for your highest interest debts first. Think about switching credit card debt onto new cards. Companies may offer an interest-free balance transfer which will buy you some time to pay off bigger chunks of this debt. Ideally, you should try and clear these before the interest kicks back in on the new card.
If you have already had insolvency problems in the past, it can still be possible to apply for Credit Cards After Bankruptcy.
Consolidating Your Debts
If you have several loans, store card, and credit card debts, one option that may suit your situation is to take out a loan that will consolidate these. Paying off all of your combined debt with one large loan will take a great deal of the stress out of the repayment of the debt as you will have one fixed monthly payment that will be easier to budget around, and you will have a clear end date for the loan assuming you keep to your payment plan.
Creating A Budget For Your Life
If you want to ensure that you keep on top of your finances better you will need to learn how to budget.
Budgeting your personal finances effectively will mean that you need to set spending limits on anything that you have control over. For example, determine how much you can afford to spend on food each week or month and then plan your meals around the amount of money that you have.
Start a spreadsheet that will allow you to proactively track all of your income and expenditure. Make sure and record everything, this will allow you to have a better understanding of where your money goes to and will teach you to become more responsible for managing it.
Ways To Make Savings In Your Life
There are many areas in your life that you can probably cut back on spending money in. Go through all of your direct debits and standing orders. If you are paying for a service that you are not getting the best use out of, cancel it. This may include things like gym memberships, streaming subscriptions, or any other on-going payment for something that you don’t really use.
Take a look at how much you are currently spending on your household bills. Many companies that provide utilities such as your broadband and electricity, or products such as home and car insurance can be switched. New customers tend to get loads of great offers thrown at them for signing up, but if you have been with these companies for a few years, you will probably be paying much more. Go and be a new customer for a different company and ensure you get into the habit of switching providers whenever the prices go up.
Changing Your Spending Habits
One of the hardest changes to make is probably going to be in the way that you spend money. Your relationship to money may have caused you to get into debt in the first place, and if you want to get to a point where you are debt-free and can stay that way, you need to make some changes.
Get into the habit of not buying things when you want them. If you don’t have the money to hand, wait and save. Do not overspend and do not put things onto credit cards.
Limit the number of takeaways you eat, let them become a monthly treat that you look forward to.
Stop getting taken in by special offers- these offers are designed to lure you in and spend money that you had not intended on spending.