Some people end up in a debt cycle without even realizing. Do you nearly always end the month overdrawn or with credit card debts left to repay? If you’re always ending the month in more debt than you started in (even if it’s not much more), you’re in a debt cycle.
But you don’t have to let your debt problems get the better of you. There’s plenty of help and advice available to people with problem debts. Here’s our quick guide to regaining control of your finances.
Budget for debt repayments
If you’re serious about repaying your debts, it’s important that you have a plan. First and foremost, you need to identify how much room you have for your debt repayments.
To do this, work out your budget plan by deducting your total essential outgoings (not including the cost of your unsecured debts, for now) from your take-home earnings. What’s left is the maximum amount you can afford to pay towards your unsecured debts each month. You might decide to hold some of this back for savings and a few luxuries, but the more of it you can put towards your debts the sooner you’ll be free of the debts you’re trying to repay.
Cut back on your spending
Take a good look at your spending and see if there are any areas in which you could easily cut back.
Believe it or not, cutting back on all your luxuries isn’t always the best idea. Some people find that they end up getting bored and spending even more than they did before. But by making sensible choices, you could save yourself more money than you may think.
For example, simple things like halving the number of restaurant meals and take-out you have in a month, or buying cheaper brands in the supermarket could save you a lot of money overall.
Take advantage of debt advice
If you’re really stuck – and the above advice doesn’t help enough – then it may be time to get in touch with an expert debt adviser who can recommend the most suitable route out of debt for your circumstances.
There are various options for tackling unmanageable debts, and your debt adviser can talk you through each of these to help you decide which is right for you.
Ultimately, the right debt solution will depend on a number of factors, including:
- How much debt you have
- How many lenders you owe money to
- Whether your debts are secured or unsecured
- How much you can afford to contribute once your other living costs have been covered
- What assets you have (e.g. whether you’re a homeowner or car owner)
- Whether you’re in regular employment
- How long it would take you to pay off your debts with your existing available income.
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