Coping with financial worry can be a really struggle, some people have discovered this more recently whilst others have been suffering for years. The Government says are the economic crisis is over but more than a few people beg to differ. Cutbacks, loans, credit cards are all ways to help one through this difficult time with the latter two options being the easiest and more convenient. However, this can spiral into more debt, causing more money to be borrowed and can leave a person sinking further into debt, being unable to find a way to claw their way back to even ground.
The strongest thing to do when faced with this common issue is to first be honest; admit there is a problem and that it needs to be dealt with head-on. The next step would be to devise a good budget plan and the following tips will give some idea on how to achieve this and return one’s bank balance to its rightful place in the black.
Tip One: Look at Personal Finances
The most obvious one and in some ways, the hardest, is to be able to assess the damage and make a comeback from it. Look at what loans are outstanding; credit cards, store cards, overdrafts and then look at all other outgoings, i.e. Mortgage, rent, bills, council tax, petrol, travel expenses, food and write it all down, there are online budget planners like on Direct.Gov but most banks have an online service to assist.
Once all outgoings and repayments have been deducted from the income, it will be clear what needs to be dealt with first. It might be a good idea to work out whatever is left and dividing it over the four weeks and using a “cash only policy” in which a specific amount of cash is withdrawn per week and all debit, credit and store cards are left at home, alleviating any temptation.
Tip Two: Determine the Worst Debt
Once aware of what is coming and going from the accounts, it might be that the outgoings exceed the income. If this is the case, talk to the lenders and explain the situation, most are sympathetic and will arrange minimum monthly payments that are affordable. The Citizen’s Advice Bureau will help and assist and may even talk to lenders to arrange minimum monthly payments.
There is a technique to master called “snowballing” which will rid a person’s debt quicker. This is done by clearing the biggest debt first. Look at which has the highest interest or the biggest amount of debit and pay as much money as possible into that debt whilst still making minimum payments across the other loans. Once one has been cleared, move onto the next highest and so on.
Tip Three: Compare for the Best Price
Make sure the household is getting the best quotes for all utilities and Insurance policies. There are many online ones such as Confused or Money Supermarket; simply enter what utility is to be compared and they will display the cheapest offer. It is possible to lower debts on credit cards by ensuring a person has the lowest interest possible. It may not seem a good idea to apply for yet another credit card but if one is offering 0% interest on balance transfers, pay off one credit card with this one and then continue to pay the debt with a lower or 0% rate of interest. Be careful to check the rate of interest after the allotted time, as it is easy to get stung with a higher rate of interest than before.
Tip Four: Useful Ideas
Other simple ideas to save money would be to take advantage of a hobby or interest, if it something creative like knitting or altering old clothes, then use online auction sites like eBay to sell them. It will not make one a millionaire but every little helps. Anything creative can be sold on this site: old clothes or anything lying around the house.
If it is essential to drive to work, try using public transport, but check if it’s cheaper, it might be more convenient too. Talk to work colleagues and set up a carpool where trips to work are shared between car owners.
A final tip would when tempted to spend is to ask this question;
“Is it REALLY needed?”
Asking this question could help save the odd penny and will outweigh the small rush received from actually buying it, which is normally greeted by a sinking feeling as it can’t be afforded in the first place.
It is never a good idea to let debt rule over a person’s life, once the household’s finances are back in control, it is important for them to remain. Admitting there is a problem will lift a large weight from a person’s shoulders; the second lift is rectifying it.