If you’ve found yourself in debt, it’s time to look at ways of reducing your monthly costs and managing your money. Debt causes stress and can ultimately lead to mental health issues, such as anxiety and depression, if it is not tackled early. There are ways of managing your finances to reduce your worry and to ensure you do not fall further into trouble:
Acknowledge your debts
The first, and perhaps the hardest step, is to take some time acknowledging your debts and how much you owe. It might be a tough experience, but it’s necessary that you understand exactly what you are dealing with and how this affects what you should do next.
Work out what money you do have
Once you’ve acknowledged how much you owe, it’s time to look at your finances. List what your income for each month is and then work out what expenses are taken from this. It’s important you are honest about what you spend each month, even on things like food shopping and petrol as this will give you a better idea of how much you have left to pay off your debts.
An online debt calculator – such as this one created by the Money Advice Service – can help you work through this. Calculate your costs by month to ensure you are as accurate as possible.
Cut back on spending
It’s important now that you find any way to reduce how much you’re spending each month, whether this means being stricter when it comes to food shopping, cancelling unnecessary subscriptions or severely cutting back on a ‘vice’ or treat you enjoy regularly – smoking, alcohol, clothes shopping or eating out. These savings could make all the difference when it comes to arranging a repayment schedule with your creditors.
There is plenty of free and confidential advice out there when it comes to getting out of debt. A free debt advice body such as PayPlan can help, and if you can see no way out of your debt issues click here to read what they have to say about applying for an IVA (Individual Voluntary Arrangement) which is a better alternative to claiming bankruptcy.
Prioritise your debts
Some debts must be paid sooner than others and it’s important you work out which ones must be more urgently dealt with. Prioritise these important debts and ensure they are tackled first. Debts such as late mortgage payments and utility bills must be tackled first, whereas credit cards and overdraft fees must be paid but can be put to the bottom of your pile.
Negotiate with your creditors
One you’ve worked out how much money you have left each month, have cut back on your costs and know what you can afford to pay back, it’s time to negotiate with your creditors. This may sound daunting, but it’s important you contact and work with them to set up a long term repayment plan. If they are unhelpful it might be time to seek outside help. We mentioned PayPlan before and they are worth contacting in this sort of situation. They can also negotiate on your behalf.