With the recession and credit crunch near to diminishing even the thriftiest of person's spending prowess, there couldn't be a better time to re-evaluate your financial forecast
2009-03-23
If you are now struggling to make ends meet and you're spending more money than you earn, you need to take action as getting into debt can affect you for years to come. Getting over a New Year debt hangover is achievable with careful planning and if you are currently in need of some financial Alka-Seltzer; here are some golden rules for dealing with debt and avoiding the pitfalls of being in debt.
1. Don't ignore the problem
Ignoring your debt will not make it go away and the longer you leave it, the worse the situation will become. Contact everyone you owe money to and explain your situation so that re-payments can be arranged. Have a forecast of your out goings and income so that you can work out with your creditors how much you can afford to pay each month. It is worth persevering with the debt agencies so that you can come to a mutual agreement. It is too easy to assume that you will be able to pay off your debt in the future when you start earning more money or when another debt is paid off.
2. Make a plan of action
Work out how much you owe and to whom. Separate your priority debts such as mortgage/rent, council tax bill, gas and electricity as non-payment of these can lead to you being evicted or having your amenities cut off. Make sure you have made arrangements to pay these before paying any unsecured debts such as your credit card.
3. Maximise your income
If Christmas and New Year was enjoyed much to the detriment of your credit card, look around for lower APR's and consider switching over your balance. There are a range of goods and services you can save money on by switching to better deals. It is also an idea to check you are on the correct tax code for your circumstances or whether you are owed a tax refund from Her Majesty's Revenue and Customs. Every penny counts!
4. Be wary about borrowing more money
This is the last thing you want to be doing. If you are thinking about borrowing more money to pay off, think carefully and get advice first. Consolidation loans mean borrowing more money, over a longer period and will mean more interest to pay. This could make your situation worse in the long run.
5. Be honest with yourself
If you feel you can't keep up with your debts, tell your lenders immediately before you start slipping behind. If you think you may be tempted to spend on unnecessary expenses, such as those black stilettos that are completely different from your other black ones, then ask a friend or family member to help you get through these times. Tell them beforehand that under no circumstances should they reason with you.
6. Have a financial spring clean
Take a look at your bank statements and spending habits. Find out where you spend your cash and see what you could easily do without. Is that coffee and croissant on the way to work each morning really necessary? By getting rid of these, you will slowly but surely see an immediate improvement in your cash flow.
If you are worried that you may be getting into debt, the National Debtline will be able to give you free and independent advice. The National Debtline is a national telephone helpline for people with debt problems. You can also go and see a local advice agency such as a Citizens Advice Bureau. Visit their websites for more details about how to contact local offices.
The earlier you start to tackle the problem, the easier it will be. If your financial situation is in danger of becoming serious, do something about it now.
www.nationaldebtline.co.uk
www.citizensadvice.org.uk
