Debt is one of the most debilitating social problems and it’s felt worldwide. But, it doesn’t have to be this way – there is always a route to become debt free. I’ve been there myself and on reflection I’ve come up with these ten debt tips for dealing with debt problems.
Stop The Rot: Accepting there is a debt problem is step 1. You have to pull your head out the sand and face the problem head on to finally get back to a debt free life.
Speak to Your Creditors: It’s frightening to talk to people who you owe money to, especially when you can’t pay them back. However, most people in this situation ignore their debts and hide away. When this happens, your creditors worry and chase you to get answers. If you go to them with an understanding of your situation you’ll give yourself less problems with creditors in the long term.
Talk to people: Get advice from everywhere; friends, family, websites and charities are great options. Don’t just take one piece of advice because that’s risky. Lots of advice from people who have been in debt or are debt experts can help guide you through the best options. If you’re scared to get help from friends and family speak to debt charities because they will give you all your options and point you towards debt freedom.
I also felt I couldn’t involve my family in my debt problem, which was a huge error. Speak to people because a problem shared really is a problem halved.
Read, Read & Read: You have to read about debt to understand it. Nobody goes to school and is taught about debt – it doesn’t happen. So when you talk about bankruptcy, IVA or debt management, what does it mean? What will it do to your credit file? ARRGHHH! I’ve no idea! Well, read about it online and in blogs because there’s plenty of people talking about debt, you just have to know where to look.
Budget Honestly: There’s no point trying to mislead yourself. Be brutally honest with your situation. Consider:
- Your Income (including salary, benefits, child support etc)
- Expenditure (what do you spend each month on food, rent or mortgage, gas / electricity, your car, council tax etc)
If you’re honest then after completing your income and expenditure you should have an understanding of what your disposable income is. For example, Income minus your expenditure leaves what you can afford to pay towards your debts. If you have a minus figure then you would try to address where all of your money is going. In the example below you can see there is £200 available to pay towards debt.
Know the facts: You can’t go to jail for being in debt, yet 30% of people with debt problems think they can go to prison for failing to pay their debt. Get the right advice before you make a decision.
Token Payments: If you’re making offers of payment to your creditors, make sure you only offer what you can afford. Most creditors will say “We need £300 by next Friday or we’re going to court”. To you or I that may mean what it says, but it doesn’t. It usually means, I’m going to scare you to see if you will be able to make payment. However, few people in debt can make this payment.
What’s more realistic is to take you disposable income and make a token payment each month. For instance, if you have £200 disposable, offer your creditor a pro-rata amount. For example, your bank is owed £1,000 of your £10,000 debt, which is 10% of the total debt. Well, the bank is offering 10% of your disposable income each month – £20!
Don’t offer £200 because that’s what you have, your other creditors need paid too.
Cut Back: You may have to cut back on some luxuries, like holidays, nights out or expensive presents. This is just what has to be done to get debt free. If your creditors know you’re out partying then you could find they become more demanding for their money back.
Avoid the Baddies!: There are companies which want to make money from your misery. They may charge you an upfront fee or get money to provide a service. They care about their profits, not you. Be sure to use a free debt advice charity!
Believe: You MUST believe there is a route back out of debt. Focus on becoming debt free once again and eventually it will happen. People don’t spend their lives in debt, unless they want to. You have to want to become debt free again!
If you’re struggling with debt I wish you the best of luck in getting debt free.
If you’ve been in debt, how did you cope? What tips would you give somebody? Who or what helped you get back out the other side?