Reducing debt: The first steps
Reducing debt: The first steps
Reducing debt: The first steps
It's fairly easy to get a credit card. Or two. Television adverts encourage you to get finance on a new car and buy now and pay later' for your holiday. Too bad no-one mentions all the stress and sleepless nights when one day you come to realize that careless spending got you into debt that will take half a decade of modest living to pay off, if not longer.
To be honest, you only have yourself to blame, but what now? First of all, don't let it depress you and act to get it over with as soon as possible.
List all your monthly expenses. Divide them in to essential and non-essential ones. The first group will be your rent (or mortgage if you have one), bills and food. While this will differ from person to person please remember to sort it reasonably. Your child's school books will be high on the list of essential expenses but a weekend outing should not. It's a perfect time to have a closer look at your spending habits and weed out the bad ones, at least temporarily. For example: there's nothing wring with a visit to a pub three days a week, but it becomes unreasonable when you're struggling with debt which could be paid off much sooner if you only gave this habit a miss. Once you're done with it, add all essential monthly outgoings.
Now take your monthly income and subtract the calculated sum of essential outgoings. What's left is the amount you can use on reducing your debt.
After listing all your expenses make a list of debts and loans you need to repay first; this will be your priority list. Paying off those will mark a milestone in your efforts to become debt free and hopefully give you motivation for further efforts. Once again, calculate the total amount and compare it to the monthly spare money. How does it look? Are you able to significantly reduce your debt over the next six to twelve months?
If so, great! Work towards your goal and soon the burden of debt will become lighter. If paying off the debts seem somehow unrealistic with your current income consider picking up a part time job.
If that still does not seem to help learn more about debt consolidation. The consolidation should not be taken lightly because it has a major negative impact on credit history. Entrusting your finances to a debt management company will have them look into all your commitments and try to negotiate with debtors. You will be required to pay a fixed monthly installment which will be shared between the most urgent of your debts, such as home debt. It's not an ideal solution but definitely one worth looking into.
Realizing that a problem exists is a first major step in fighting debt. Now that you know what are the options think it over and decide on the best course of action. Should you require any more information check out HomeDebt.co.uk for debt related advice.
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