Debt is a part of life in modern society, and almost every adult in Britain has some form of debt to repay. However, for some consumers it becomes a serious problem when mounting debts begin to exceed income and they struggle or fail to keep up with repayments. Here are some tips and advice on how to get out of debt.
Getting out of debt is not easy and it takes positive action and good planning to do it effectively. There are a number of steps that need to be taken:
- Identify and prioritise and your debt
- Prepare a budget and stick to it
- Keep up with repayments
Identify and prioritise your debts
You may have been putting it off for a long time, but the first step is to list all of your debts and make a note of details. How much do you owe? Who do you owe? When is payment due? The next step is to prioritise these debts. Identify the debts that need immediate attention and the ones that you simply have to pay (e.g. mortgage, utilities, debts where legal action has taken place or is pending).
If you are in arrears and/or struggling to keep up payments on any of these debts you should contact the lender immediately, by letter is best. This may be daunting, but any lender will be happy to receive communication and some may be surprisingly helpful by offering reduced repayments over a longer term or some other solution.
Dealing with these priority debts should take a lot of the pressure off. So then turn your attention to secondary debts ? money that has been loaned to you without providing any security. These include bank overdraft, credit card debt and debts to family and friends.
Now that you have listed and prioritised your debts, you will need to move onto the second step ? preparing a budget.
Prepare a budget
Put simply, a budget is a list of money you receive and how you intend to spend it. A good personal budget is essential for financial wellbeing and is a key tool in the prevention and cure of personal debt problems.Begin by calculating your weekly or monthly income, then work out your spending and finally calculate how much you can afford to spend on repaying your debts. The best way to do this is to draw up a budget sheet where all incomings and details are set down in detail.
There are countless websites and debt counseling agencies that provide free budget sheets. From this you should get a good idea on how much money you can spend on servicing your debts. Also, explore ways on how you can reduce your outgoings by, perhaps, reducing mortgage payments, cutting down on luxury items, or shopping at the supermarket instead of the local grocery store.
If you can keep up with your repayments, you are well on your way towards getting out of debt. The top priority from here on in is keeping up repayments. Try to set up a special account where you can deposit money needed to pay off debts, and find a quick and convenient payment method, like the internet or a local post office, if you can.
Getting out of debt can be a daunting task, but it is far from impossible. Whether you decide to enlist the help of a debt counseling service or opt to go it alone, we hope the tips and advice above will help you to achieve your goal.