Debt can sometimes feel like an overwhelming problem, spilling out of your bank account and affecting other parts of your life. But that doesn't mean it can't be solved. If you're struggling with debt or know someone who is, here are some simple, manageable tips to help you tackle the problem head on and get back into the black.
1. Acknowledge the problem
The first step on the road to getting out of debt is acknowledging that you may be struggling. Accepting the situation will make it far easier to tackle the issue, giving you a clear head and a tangible goal.
2. Budget
Write down all of your incomings and outgoings, and use Money Dashboard to help you keep track of your monthly expenditure - this will make it much easier to see where your money is or has been going. Use this information to build a clear picture of your finances across the next few months, and start planning where to make cuts.
3. Check your entitlements
Make sure that you're receiving all of the government funded benefits that you're entitled to. If you're on a low wage, you could be eligible for Income Support, Child Tax Credits and Council Tax Relief. You can find out exactly what you should be receiving from the Department for Work and Pensions.
4. Cut back
Have a money makeover by identifying areas where you can cut back. Think about switching your utility providers, and try to scale back spending on everyday things like transport and food by buying value-for-money travelcards and own-brand products. Selling things like old clothes and furniture on sites like eBay can also help make a dent in the debt. Our smart Money Dashboard software will make it simple to identify cuts to your outgoings, making it that much easier to clear your debts.
5. Organise your payments
Ensure you're paying your bills by direct debit - this will save you time and money by avoiding late payments. Many companies also offer incentives for paying by direct debit, which is an added bonus.
6. Cut up your cards
If you have store cards, now's the time to cut them up. High rates of APR could be stinging you, and it's better to get rid of the temptation completely. Try to limit yourself to one credit card with the lowest rate of interest, and be on the lookout for balance transfer offers that give you an introductory interest-free period.
7. Look for advice
It's important to find the right support while you're paying down your debts, so don't be afraid to seek professional advice. The Citizens Advice Bureau is always a good place to start, and a free help service like StepChange or the National Debtline can offer invaluable support.
8. Contact creditors
Be open and honest with your creditors - write to them with evidence of your financial situation, what you plan to do next, and express your desire to set up a sensible payment plan. Most creditors will be empathetic and helpful. Always start by dealing with your most pressing debts, and don't be pressured into making payments you can't afford.
9. Think long term
Consider your options for paying off your debts over the long term. There are multiple tools available including Individual Voluntary Arrangements and debt consolidation loans that can help you spread the cost of repayments over the coming years. Speak to a debt advice charity or contact a financial advisor to discuss the option that's best for you.
Posted by Money Dashboard
