If you are in debt, you need to take action quickly to stop the situation getting any worse. Never forget that no debt problems are insurmountable. The road to repaying debt may not be quick or easy but there is always a route. Debts are urgent as it is easy to spiral rapidly into trouble. Therefore the earlier you deal with them, the easier they are to deal with. Debt is not just a finance issue. It feeds into all elements of your life so solutions are wide and varied; from cutting interest costs, budgeting or simply getting free, non-profit one-on-one help.
Working Out Your Budget
If you have mounting debts, the first place to start is to spend some time working out if/where you can find the money to start paying off what you owe. To do this, you will need to identify your total income (money coming into your household on a regular basis) and compare it to a list of your essential outgoings on a regular basis. This will be known as your budget and the amount left over (if any) can be used towards repaying your debts at the earliest possible opportunity. The first thing you need to do to work out your budget is list all the income for your household. Be honest and make sure that the amounts are realistic. The list of your income should include:
Benefits (including child benefit and tax credits)
Maintenance from an ex-partner for you or your children, include any Child Support from the Child Support Agency
Additional Contributions (board from family members or lodgers for example)
Listing your expenses – The time spent identifying all essential expenditure offers the ideal opportunity to think about where any cutbacks can be made. If you identify any areas in which savings can be made, it will make more money available for you to pay back your debts. Under expenses, you should include:
Housekeeping – Include realistic amounts for what you spend on food, toiletries, school dinners and meals at work, cleaning materials, cigarettes, sweets, children’s pocket money and pet food
Unavoidable Housing Costs – This is a fairly wide ranging category as it will include mortgage/rent, buildings and contents insurance, service charges and life or endowment insurance cover attached to your mortgage, council tax, gas, electricity and water charges. Telephone charges, TV licence and any TV rental costs
Travel Expenses – Include both public transport and the cost of running a car such as road tax, insurance, and maintenance
Additional Expenses – This may include medical and dental expenses or support for an elderly relative as well as emergency funds set aside for unexpected events and contingencies.
Dealing with Your Debt
Once you have listed all your income and expenditure, add up the figures and see if you have got any money to spare to pay back your creditors. If you have got money to spare, you will need to work out how you are going to pay off your debts. You will also need to:
Identify Total Debt
Prioritise Debts (try to pay off the most “expensive” debt first)
Identify Payment Options
If you do not have any spare money to pay off your debts, you will have limited options for dealing with your debt problem but options do still exist such as debt consolidation loans including guarantor loans. Ensure that you fully explore all options available to you and you may quickly find that a route away from debt does exist.
Amanda Gillam is Solution Loans's General Manager and has been since 2009. She is also a prolific writer on personal finance issues, and has been quoted numerous times in articles published on 3rd party websites and in press releases. Her...Read about Amanda Gillam