How to deal with your debt
These days, most people have some kind of debt – but if you are getting to the point of being scared to open letters or pick up the phone, it is time to take control of your debt. It doesn’t matter how much you owe, you need to deal with it sooner or later and it may as well be sooner than later. A pile of threatening letters is not nice for anyone to deal with and it can lead to a lot of stress and even depression. It is far better to take matters into your own hands and deal with your debts head on. You will feel so much better if you start taking control and do it now. These are some ways to deal with your debt.
Work out what you owe
The first step you need to take is to understand how much you owe and who you owe to. It is a good idea to start with priority debts, as these should always be paid first. For example any rent/mortgage arrears you may have or council tax, gas and electricity. The greater your understanding of how much you owe, the easier it will be to get started on paying it off.
Contact your debtors
Now that you understand who you owe money to, it’s time to start getting in touch with your creditors. You may find that you can negotiate with some of them to reduce your payments, but either way, you can reach an agreement of what to pay each month. Most creditors will be willing to take small payments; they will just be happy to start getting their money back. The minimum payment will usually be enough to get your creditors off your back.
Start making payments
The sooner you start making payments to your creditors, the better – so now that you have reached an agreement, it is a good idea to start setting up direct debits or standing orders, so the money comes out automatically and you don’t need to think about it anymore. Even better if you arrange it for your pay day, as the money will be debited from your account and will be gone before you even get a chance to think about it. A little depressing, but it will make your life much easier in the long run when your debt is all paid off.
Stop taking credit
You may be paying off your debt, but this is not an excuse to start taking out more credit. In fact – this is the last thing you should do. It is time to say goodbye to credit, at least until you have made a dent in your debt, but it would be advisable to stop taking out credit full stop. If you can’t manage your finances with credit and many people can’t, it is best just to avoid it completely. Save up for anything you need or just do without it.
The better your finances are, the more money you will be able to save to pay off your debt – so if you don’t budget, this is the time to do it. When you start budgeting you’ll probably find that you are wasting money on a lot of things you really don’t need and this could be going towards paying off your debt. It may feel a little boring to budget, but once you actually start doing it, you’ll quickly understand how beneficial it can be for saving money and getting yourself out of debt.
You should also start working your way towards creating an emergency fund, so you don’t end up in this situation again. You ideally want to have at least a few months’ worth of salary saved up as an emergency fund, although this is easy to say but much more difficult to put into practice. The last thing you want is to get out of debt, only to start getting into debt again. You need to change your whole way of managing your finances to get into a better situation overall.
It is really important to know when you need help and support for managing your finances. If you find yourself getting stressed about your debt or there is just too much to pay off, you might be able to get some support. There are lots of financial institutions available to provide support to those who need it, so whatever you do – don’t be afraid to ask for help.