Do you feel that getting out of debt is like climbing a mountain but never getting to the top?
If you do, you’re not alone – millions of people in the UK are in exactly the same situation – but fortunately, with the right advice, you can work toward being back in control of your finances.
We’ll take you through 4 easily achieved first steps that you can do today – each one taking you closer to resolving your money problems by tomorrow.
If you’re anything like millions of other people in the country, the idea of opening your letters from creditors is one that fills you with dread. However, it’s important to understand why ignoring them can leave you in an even more dire situation.
Debt doesn’t go away, no matter what tricks people say exist – and actually, the companies you owe money to are likely to be far more understanding if you talk to them.
So, step one needs to involve pulling all those letters out of the drawer and opening them. If you feel too anxious to do it alone, ask a trusted and non-judgemental family member to come and support you while you do it, it always feels good to have someone on your side.
Make a note of all the companies you owe money to, the most recent amount they’ve requested and any account numbers you have. It might not feel like it, but facing up to the problem is an enormous part of the battle.
No one expects you to go without paying your rent, mortgage or other important outgoings to clear your debt – which is why it’s really important that you work out what your incomings and outgoings look like every month.
Working this out is a little time consuming – but you only need to do it once – and when it’s done, you can add and takeaway the numbers to get a good understanding of your spending.
Start with a piece of paper and a pen, make a list of everything you have to pay in the month. To begin with it’s important just to focus on the ‘essentials’, rent, mortgage, bills, payments and food and clothing costs.
Then make a note of all the money that’s brought into the household. That could be your salary, partner’s income, benefit payments… and so forth. Total up both of these lists. By taking the essential outgoings amount away from the overall income amount, you get the remainder that you’ve got to work with for the month.
Now, it might look like a lot, it might look like a little – but you’re not finished with it yet. Start a third list, adding up everything that you spend money on that isn’t an ‘essential’ – that might be nights out, hobbies, smoking – and so on.
It might shock you what these things add up to. Creating a budget like this is useful in two ways – first to give you an idea of how you really spend your money – meaning you can make changes if you like, and secondly, creditors and debt management companies might want to get an understanding of how much you can afford to repay – so doing it now shows that you’re willing to start working on the problem.
Now, it’s easy to just tell you to start calling all your creditors and negotiating amounts of repayments with them – but in reality, this can be an extremely difficult process for an individual to manage.
Generally, the first company you speak to will want you to repay them as much as is possible – but where does that leave you with other companies that you owe? It’s very difficult to balance your repayments and make sure every company is satisfied.
For that reason, it’s worth talking to a company who can help you negotiate your position with all your creditors.
For an in depth view of what a company like this will do for you, have a look at this 2017 National Debt Relief Review (Recent Update). Essentially, you’ll have someone on your side who’s working with all your information and negotiating repayments that suit your budget – and satisfy your creditors. What’s more, they’re specially trained to negotiate with businesses, meaning they’re likely to get you a better deal than doing it yourself.
If you want to take the anxiety and logistical planning out of the picture, a company like this can be a massive help.
When you worked out your budget you got to a figure that was left after you took your outgoings from your income – this is generally referred to as your ‘disposable’ income.
Digging deep into how you spend this might give you a few shocks – especially when you add things up over the course of a month or a year. The best place to start looking at amounts of money that you don’t realise you’re spending is direct debits, recurring card payments and subscriptions.
Companies can be quite crafty in how they take your money – for example, you’re less likely to miss a small subscription payment when it’s taken just after your payday – whereas that extra small amount could be really helpful when it comes to paying bills toward the end of the month.
Look at on-demand TV packages, phone bills, gym memberships and magazine subscriptions and ask yourself “do I really need these things?” – sure, they might be a luxury, but if you’re watching a couple of movies every month – is it worth subscribing the channels?
After that, look at habitual spending – even take away coffees and lunchtime meal deals all add up.
No two people’s lifestyles are exactly the same – and we all need different things to get us through the day – but it’s really important to consider what you spend your money on – and whether it’s hindering your ability to pay off nagging debt. A series of small sacrifices now can mean you get a better night’s sleep when you don’t have debt to worry about further down the line.