How to deal with debt. The hardest part of being in debt is admitting to yourself that there is a problem.
Don’t let debt defeat you
Once you acknowledge that you are in debt, not only will it release pressure (if you were hiding it) but it genuinely makes it much easier to manage.
- If you are suffering financial hardship for whatever reason, if you tell the person or company you owe the debt to, they may be able to help you.
- If you have a shopping addiction, you need to be treated for the addiction. Asking family and friends to lend you more money will not solve the real problem.
NEVER bury your head and ignore it, it will only get worse.
When you are ready to start changing your life for the better follow this guide:
- Talk to your spouse (if they are not aware of it) or a supportive family member. Let them know the situation so that you are not coping with this alone.
- If your debt issue is caused by your behaviour (out of control spending, obsessive compulsive disorder or some form of other disorder/addiction) contact your GP. Ask to be referred or self refer for CBT (Cognitive Behaviour Therapy). CBT is a talking therapy that can help you change the way you think and behave towards certain situations.
- If you have a credit card, switch it to a 0% balance credit card as soon as possible.
- Write to the credit card company asking them to freeze the interest and stop the card until you pay off the debt.
- NEVER use a payday loan company EVER.
- Never just pay the minimum on your credit card, always pay more.
- Apply for your credit report. Check it. If there are any mistakes on it, write to the company and ask them to amend it. For guidance on how to do this click here.
- If you do have some savings for a rainy day or you are given money by family and friends, try to pay off some of your debts, loans or credit cards with it.
- If you have a large extended family to buy presents for at Christmas time DO NOT spend more than you can afford. Speak to your family, they will understand. You can always do a secret santa with a set amount of money to spend on one gift each amongst the family. This is a fantastic way to bring an element of fun without the breaking the bank.
Now it is time to tackle each debt head on, follow this guide:
- On a sheet of paper, write down a list of your debts with the name for each debt and the amount owed next to it.
- Using a monthly expenditure form, go through your household and work related expenses.
- Once you have set out all of your monthly payments, you will be left with a figure to live on and a figure to pay any debts with.
- Equally divide the amount you have left to pay debts with across all of the debts you have (if you have ten debtors and you have £100 left each month to use to pay towards all of your debts, you can offer each debtor £10 per month). That is how a debt management company would do it except they take a portion of that too from you for organising it!
- Contact each debtor/company/person that you owe in writing and advise each one what you can afford to pay back.
- Make an arrangement to pay by direct debit or standing order to each debtor every month.
- It is as simple as that!