When does debt consolidation make sense?
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I'm single journalist living in Brighton and I need help. I have over £10,000 in credit card debts. What should I do to get out of debt in 2011?
jonesy1
1 year ago
Expert Financial Adviser Answer
Dr David Carter FPFS
answered 1 year ago
Credit card debt is very expensive, and debt consolidation, where you roll these debts up into a single one at a lower interest rate, could well save you money in the end, as well as reducing your monthly outgoings. However, be careful where you get such a loan from, using a high street bank if possible, and check the details very clearly. Incidentally, the way many people run up high credit card debt is to use their cards for lots of little purchases, or to take cash out (perhaps in small amounts) as and when they want some. If this is you, maybe you could decide to take the week's money out on the same day, not using the card until the next week.
The danger is that, once you have consolidated your cards into a single loan, you will start running up your card debts again - so ending up in a worse state than you are at the moment. A way to reduce the likelihood is to cancel your card arrangement (don't just cut up your card).
Thinking about your spending patterns so far and designing a budget (contact me if you would like me to send you a budget planner that runs on Excel) will help you manage your finances. And do take a long-term view; managing your finances effectively is like overeating: losing weight slowly by changing your diet permanently is far better than going ON a diet. Your financial diet needs to be sensible and gradual and controlled, with enough slack and enough enjoyment money to make it acceptable for you.
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The danger is that, once you have consolidated your cards into a single loan, you will start running up your card debts again - so ending up in a worse state than you are at the moment. A way to reduce the likelihood is to cancel your card arrangement (don't just cut up your card).
Thinking about your spending patterns so far and designing a budget (contact me if you would like me to send you a budget planner that runs on Excel) will help you manage your finances. And do take a long-term view; managing your finances effectively is like overeating: losing weight slowly by changing your diet permanently is far better than going ON a diet. Your financial diet needs to be sensible and gradual and controlled, with enough slack and enough enjoyment money to make it acceptable for you.
Expert Financial Adviser Answer
Darren Smith
answered 1 year ago
I strongly agree with David's comments and would also suggest a first step being an analysis of your income and outgoings.
are you paying for that 2010 new year resolution of a gym membership - never used it? well you can probably cancel it now we are in 2011 before the contract renews.
identify all your essential living costs and the discretionary/luxury items. cut out the ones you dont need and review the cost of the ones you want to keep.
you dont have to go from socialite to hermit but do you really "need" the movies and sports channels? can you improve the cost on utilties - you can make lots of small savings by opting for online billing instead of paper and energy companies will give online tariffs. these steps alone could trim up to £100pm off your outgoings without even sacrificing anything.
a few small, disciplined changes, will enable you to create a good spending and savings habit so that once you have paid back the debt, try and save at least half of what you paid each month to the loan to build up savings.
its always cheaper to spend your own money than borrow someone elses!
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are you paying for that 2010 new year resolution of a gym membership - never used it? well you can probably cancel it now we are in 2011 before the contract renews.
identify all your essential living costs and the discretionary/luxury items. cut out the ones you dont need and review the cost of the ones you want to keep.
you dont have to go from socialite to hermit but do you really "need" the movies and sports channels? can you improve the cost on utilties - you can make lots of small savings by opting for online billing instead of paper and energy companies will give online tariffs. these steps alone could trim up to £100pm off your outgoings without even sacrificing anything.
a few small, disciplined changes, will enable you to create a good spending and savings habit so that once you have paid back the debt, try and save at least half of what you paid each month to the loan to build up savings.
its always cheaper to spend your own money than borrow someone elses!
