Debt doesn’t discriminate, it really can happen to anyone. No one ever sets out with the intention of falling into debt but it’s easily done, but if you’ve found yourself in this situation it’s always going to be stressful. Debt has a huge impact on mental health, and along with other financial worries it can literally take over your life. Here are a few things you can do to address the situation and start putting things right.
Set a budget
Everyone should have a budget. It doesn’t matter if you earn a little or a lot, if you pay lots of bills or just a few. A budget keeps your spending on track, ensures you’re not living beyond your means and that all of your important bills and expenses are covered before you spend on luxuries. Find a method that works for you, some people find old fashioned methods like notepads and writing on a calendar the best option. However, there are all kinds of apps, softwares and tech these days that can automate things and make budgeting much easier. One useful way to sort your money is to have all bills come out direct debit out of a bank account separate from your regular current account. Every time you get paid, you simply transfer a set amount each week or month into the account and the bills take care of themselves. No calling up lots of companies or making payments on websites, it’s all much easier. And as it’s separate to your regular spending, there’s no risk of spending it again. Work out your budget, and where you can make cutbacks, and use any extra cash towards your debt. It might mean tightening the belt on luxuries for a while, but it will be worth it in the long run.
One of the reasons that debt is so troublesome is because it starts to spiral. Due to interest rates, you can end up paying more back than you ever borrowed in the first place, each month you carry a balance you’re also paying interest to the company. Over time, and over multiple debts it can really add up, and you might even reach the point where you can only afford the minimum payment each month. The minimum payment only covers the interest, so you can end up where you’re paying on time but never actually bringing down the overall debt. One way to break free of this cycle is to consolidate. Here you take out a loan or credit card and use the balance to pay your other accounts. You could choose a loan with a low interest rate, or one that’s designed for consolidation purposes- these will usually have 0% interest for a set period of time- giving you chance to pay down as much as possible. If you have a poor credit score, you could compare guarantor loans. Check the interest rates and work out how much you’ll be able to save. At the very least, you’ll only be making payments to one company rather than your debts being spread out all over the place.
Sell what you no longer need
Lots of us are sitting on hundreds, maybe even thousands of pounds of unused items in our homes. Old jewellery, antiques, technology, clothes- if you’re not using it, chances are there’s someone out there that will. Sell items on ebay or facebook marketplace. Go to boot fares, and sell clothing on specialised sites like Depop. It’s a chance to declutter your home, make space and earn some money at the same time. If you get a chunk of cash together, you could use it to pay off one of your debts- or at least towards them. It’s better that the money is contributing towards your journey to being debt free, that sitting in the form of unused items in your home gathering dust! Go through each room, taking things out of drawers, wardrobes, under the bed and from the attic. Anything that’s no good can go straight into the bin to free up space, useful items which you’re no longer using could be sold.
Earn more money
Earning more money isn’t as difficult as it sounds. It could be a case of doing overtime at work or picking up extra shifts in the short term so you have more money to pay down debts. You could start up a side hustle– blogging, freelancing and home businesses can all bring in extra cash and it’s something you can do from home, in your free time. Anything extra you can earn means more to pay down balances and the quicker you’ll get them paid off. It doesn’t need to be forever, you shouldn’t be looking to work yourself to death for the next decade. But if you have the ability to earn what you need over a year or a few months by putting some extra hours in then it can massively benefit you and save you money in the long run.
Seek professional advice
If your debt has spiralled and is no longer at a manageable stage, your only option is to seek professional help. Don’t just bury your head in the sand as it will continue to get worse, you have to take that step to getting back on track. A debt management company or a charity can work with you to decide what your best plan of action should be, based on what you earn and what you owe. For some people, an informal ‘debt management plan’ is the way to go, here creditors agree to freeze your interest and accept a lower repayment amount so you can regain control of your finances. In more severe cases, a formal IVA or even bankruptcy could be the only answer. Either way, it’s so important to get the help you need so you can get back on track and finally get your finances back in order.