Anybody can find themselves trapped in a spiral of debt. If you’re in a difficult financial position, it’s important to face your problems head on and tackle the matter while it’s still manageable. Snowballing money troubles can place significant strain on your physical and mental health as well as your social life. In this article, we reveal a simple step-by-step process that will help you as you gradually work towards freedom from debt.
Look into Revisions and Adjustments
It can be a little painful, but it’s a very good idea to undertake in-depth research into your existing debts. Do you really need to pay the amount that is being demanded of you? Break down the sum into its separate parts (original owing amount, late payment fees, administration costs and anything besides) and find out whether you can appeal certain areas in order to reduce them. Once you’ve looked into possible reductions, you might consider approaching companies that enable the consolidation of debts, helping you to pay everything back with a lower rate of interest. You can also look into payment plans with the organizations to which you owe money. This will let you make a small, manageable payment each month in order to repay everything in an affordable way. Finally, you could look into remortgaging property or refinancing student loans to release a little equity and save enough money to pay back a good quantity of your debts.
Draw Up a Budget That Includes Repayments
Once you have a clear idea of how much you owe and the approaches available to make repayment easier, you should put together a comprehensive budget of your income and expenditure each month. Take everything into account, from electricity and water bills to toiletries, food and rent. Don’t forget nights out and little treats. Try to work out how much of your income you could free up in order to make payments that will go towards resolving your debts.
Once you’ve decided which of your expenses are less necessary, it’s time to make cuts. Be brutal, but don’t leave yourself starving. Do you need a gym membership or could you run in your local park? Could you brew a flask of coffee at home instead of visiting chains? Should you give up branded products and use own-brand goods instead? Can you reduce the amount you eat out or consider reducing your electricity and water usage? While each of these approaches may seem to only make a tiny difference, the overall effect each month can be significant. The money you save can go towards paying off your debts.
Make a Plan
Once you’ve done everything you can to start paying off your debts, it’s time to look to the future. How long will it take until you’re back in the black? Will you need an extra boost? How likely is it that you’ll find yourself in this same position further down the line? Try hard not to borrow more money in order to reduce your debt, as this will just end up sending you further down the same hole. Instead, consider taking on a second job, downsizing or selling things in order to achieve a little more financial freedom. Remember, you won’t have to go without forever. Try to develop an ongoing approach that will encourage you to take better care of your money – and consider opening a savings account to help you keep your funds safe. If you follow these steps, your future may end up looking a lot more comfortable.