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Being in debt is not something anyone aims for, but a lot of us are probably in exactly that position. According to the TUC, the average UK household has £886 more non-mortgage related debt than they did the year before.
If you’re in a situation where your debt is getting worse, or not going down, you need to take action to get it under control. Here are some tips for handling debt to get you started.
First steps to handling debt
A good place to start is to seek advice from Creditfix or somewhere similar. Organisations and firms that deal with debt problems day in day out will be 100% up to date, and familiar with the ins and outs of the financial, bailiff and court systems. Provided you contact them at an early stage they can help identify the best way out for you.
As well as seeking advice and putting it into action, you need to review how you handle your finances. It’s vital that you learn to manage your debt and daily living expenses. Forming good habits now will help you to stay the course when getting out of debt, and also help prevent you from falling into debt again in the future.
Review your spending
A big part of successful debt management is understanding where your money goes. Once you know that, you can clearly identify which path out of debt is likely to be manageable for you.
There are two steps to this process. The first is to use your bank statements to look back over the past year, identifying where your money went. This can be time-consuming, but it’s worth the effort and it’s the easiest way to get an accurate picture of your spending. Creating a simple spreadsheet will really help, and you can use it to track your spending going forward too.
When reviewing your spending, don’t worry about the fact you will not be able to identify how you spent every penny or cent. At this stage, you’re trying to work out what your regular living costs are.
Work out a budget – and stick to it
Once you have completed your spending review, you will be able to put together an accurate budget. Having done the groundwork by reviewing your spending and income, you should be able to set a realistic budget that you understand, and are physically able to stick to.
Use a good budgeting app
The best way to live within your means is to monitor what you spend on a daily basis. There are some really great budgeting apps that allow you to use your smartphone to record what you have spent as you go. This article gives a quick overview of the best ones.
Downloading an app and using it to record what you spend from now on means you’ll have to wait several months before you get a clear picture of what is going on – so if you just rely on this you will effectively delay your debt recovery. For this reason, it’s still important that you do the paper exercise of reviewing your spending as well, as this will give you an accurate picture of your spending straight away.
When it comes to choosing a budgeting app, try to go for one that you like the look of, and which is easy to navigate. The easier it is to use, the more likely you are to use it!
If you decide that you really don’t like the budgeting app you’ve downloaded, make sure you swap to another one quickly. It’s not always easy to move details of your spending from one app to another. So, if you do need to swap, the sooner you do it the better.
Review your progress regularly
Once you’re in the habit of budgeting and managing your debt, it’s worth checking your progress on a regular basis. Doing so will help you stick to your budgeting goals, and you’ll also be able to pick up on any money issues before they have a chance to become a problem. It’s very rewarding to see the progress you’re making too!
What’s your top tip for handling debt?
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