Debt is something that a large proportion of people in the UK live with. The Money Charity has predicted that by 2020 adults will each owe an average of £47,000 and with factors such as rising house prices pushing up the size of mortgages it’s unlikely that we will be a debt free nation any time soon. Debt is often viewed as a negative but if you have borrowed for a constructive reason then in that sense debt can be a stepping stone to better things. With that outcome in mind how should you manage your debt to make sure that it works for you?
Knowledge is power and that’s particularly the case when it comes to what you owe. You need to keep a record of outstanding amounts, interest rates and payment dates so that you are not making decisions in the rest of your life based on a lack of information or on the wrong information. Create a spreadsheet, make notes or use an app – just be aware of where you are with what you owe at all times.
Research your options
Different types of debt are created for different situations and it’s a good idea to research your options before making any decisions, or when looking at moving debt around so that you can manage it better. There are a number of factors to take into account here and these include looking at how much flexibility you need in terms of access to debt, when you want to repay it and how you want to make those payments. You may find that a credit card is your best option, or perhaps a revolving credit facility may be better suited to your needs. If you’re looking for short-term debt then payday loans are easier to manage than a loan with a longer term.
When it comes to debt we can get very ambitious about repayments. It’s often better to start with modest repayments that you know you can manage so that you don’t end up missing payments. How much can you afford to pay on your debts every month and still have enough income left to cover all your outgoings? Making gradual progress towards debt repayment is far better than having a couple of months of extreme repayments and then not being able to make any at all.
Change your view of debt
Debt is something that many people feel ashamed of but the reality is that it can open doors to many things. For example, how many of us would be able to buy a home without the assistance of a mortgage? Rather than viewing debt as something to be ashamed of, look at how debt might help you achieve your goals, long term or short term. As long as you can manage the repayments and the interest rates seem reasonable then there’s no reason why debt shouldn’t be a springboard to better things, from starting a new business to creating a family home to improving your education and employment prospects.
Get tough with yourself
We all love our little luxuries – for you that might be something as simple as a gym membership or it could be shopping at a specific supermarket or buying a new pair of shoes. The reality with debt is that if you want to pay it off then you need to learn how to save and saving means cutting back on the non-essentials we all love that tend to push our weekly budgets through the roof.
Managing debts is much easier to do with a plan. You’ve already made yourself aware of what your debts are if you’ve been following these tips, so the next step is to set down a structure of what you want to do with them. What are your end goals? What time frames do you have? What can you do to get to where you want to be when you want to get there? Be realistic and well informed and come up with a plan that will work for you and you won’t find it difficult to stay on top of your debts and make them your friend rather than an unpredictable enemy.
Not all debt providers are the same and you can make your debt more affordable by choosing the right one. Above all, make sure you’re not paying unnecessary charges or interest that is unaffordable to you for the type of debt you need. Make an informed decision and you’ll find your debts never spiral out of control.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley