Keeping Debt In Control
Excessive debt is the new guilty secret of many families
and individuals in Britain. Credit cards, store cards, mortgage refinancing,
and consolidation loans are like addictive drugs causing peoples' "I've
got to have it" and "I deserve it" emotions to overwhelm all other rational
thought - financial or otherwise.
The income that could provide you with sufficient and reasonable
financial security is eventually overwhelmed by re-payments on your
accumulating debts.
Even worse, your total debt begins to increase at a faster rate
than your income, and at a faster rate than you can pay them off.
Thus the downward spiral begins!
If your monthly payments aren't leaving you with enough money to
live on, you need to take action now. Don't just ignore it, as it
will not go away.
What Should I Do?
Firstly, get organised. If all your paperwork
is in order, it can make you feel more in control.
Secondly, you need to budget. Work out your income and expenditure
and you will see where things need to change to make savings, and
look at the priorities. Don't forget to consider occasional costs,
such as vet's bills, car repairs, etc. You also need to look at your
standard of living and consider if your circumstances could change,
such as losing your job. You don't want to be spending up to the limit,
and save a bit of money as a cushion. Try to buy everything with cash.
When you have set out a budget record you will either have a budget
surplus, which you can use to share out amongst your unsecured creditors,
or a budget deficit, which means you have to make changes in your
life.
How Can I Reduce My Spending?
To reduce your spending, you need to consider
if things are absolutely necessary. Some tips on reducing spending
include:
Housing - look for sales for furniture and appliances, and
consider DIY.
Transport - consider public transport. If you have
more than one car in the family, look at having just one,
or sell it and buy a cheaper one.
Utility Bills - compare providers for cost.
Food - packed lunches for work/school. Use coupons
from magazines, etc. When you go shopping, prepare a list
and stick to it.
Clothing - plan spending on this in advance
and don't go over. Shop around in charity shops.
Insurance - only get what is really needed, and shop around.
Entertainment/Recreation - look for activities close to home
that are cheap or free. Set limits on spending, e.g. on holidays,
and stick to it.
Savings - open a separate savings account to cover those occasional
costs or to save for holidays, etc.
Work - see if you have the time to get a second job.
Credit Cards - One of the best steps you can take to get out
of debt is to immediately stop using credit cards. At the very least
destroy all your cards keeping just one card for emergencies.
Who Should I Pay First? You need to prioritise bills like
your mortgage and utilities, followed by clearing the credit/store
cards with the highest interest rate first. You could also consider
changing credit cards to a company with a lower interest rate.
It is best to speak to your creditors as soon as possible and keep
them informed. This makes it much easier for you to come to agreements
with them.
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