Having debt can make you feel like you have lost control over your life, especially if you find yourself in a situation where debt accumulates very quickly due to high interest rates. Loosing this sense of control can lead to a never ending and ever increasing array of issues both physical and mental. It is so easy to get into debt, but the road out of debt can be slightly more difficult. If you ever find yourself in this situation, remembering these six tips will help you get back on the right track to managing your debts and eventually paying them off.
Create a Budget and Stick to It
Budgeting, in any situation, is a useful and often essential tool. It will give you a clear overview of how your finances are looking in terms of how much income you have, how much you are spending, how much you may owe to how much you can afford to pay back. With a successful budget, you can ensure that you have the money and you are organized to pay what’s needed and when. Planning a budget can help address any areas that debt may occur before they even happen, so even if you are not in debt, it is highly recommended that you keep an up to date budget with you at all times. There are many ways that you can do this or have others do it for you. If you want to plan out your own budget, then the most efficient way of doing this is by using a budget worksheet to help map out your monthly spending.
Stop Creating Debt
It is easier said than done, but it is one of the first points that needs to be addressed; the more debt you add, whilst trying to pay it off will not get you very far. The easiest way to do this is to get rid of the temptation of borrowing money. Cut up your credit cards. If you don’t have them, then you won’t be using them.
Don’t Miss your Repayments
Keep up to date with your payments and make sure that you are paying the minimum requested so that you can avoid any charges and unwanted penalties. If you skip a payment, then your credit score will be negatively effected and you will just be going around in circles. In fact, try and pay more than the minimum amount because if you just pay the monthly minimum, you will not be making any difference to your debt.
Make Extra Cash
You may be asking now “Well how can I afford to pay more than the minimum?”. Get a little creative and look into ways that you can earn some extra cash or make savings on current outgoings.
- Look at the internet, phone, home insurance packages that you currently have, and ask yourself “Can I downgrade?”
- Have a garage or car boot sale – there may be plenty of things lying around your house that you do not use and may be worth some money.
- Check out the sale areas in supermarkets when shopping for groceries- a lot of money can be saved here, and the food will be just as good.
- Look for budget plans for your utility bills.
- Take pack lunches to work, instead of buying out.
When given proper thought, there are so many things that we can save money on. Put all those savings into a jar and use that jar to fund your monthly re-payments.
Improve Your Credit Rating
This links into the previous two tips. By re-paying higher than the minimum payment each month, you will not only pay off your debts quicker, but you will also improve your credit rating. This will help you in the future if you are ever in a safe place to borrow money from financial organisations.
Checking your credit scores and credit reports on a regular basis and using eligibility calculators online are two ways that you can keep track of and improve your credit rating. There are also specific credit cards available that are designed for individuals with bad credit score that if you manage your repayments correctly, will lead you towards a good credit rating.
Seek Debt Consolidation
Consolidating all your debts into one monthly repayment is an excellent way to improve your credit rating and at the same time make your debt much more manageable. National Debt Advice can help individuals reduce their debt by up to 85% by simply consolidating loans from several creditors. Once this is done, there is no need to take out more loans and it can put a stop to interest rates and any demands from lenders.