Getting Out of Debt

Economists keep telling us we’re in a recovery, but if you’re like millions of other people in the UK it is possible that you have yet to really feel the effects of that recovery. Maybe you feel that your own personal “economy” is in dire need of improvement, perhaps because you are overcome with debt. A little bit of debt isn’t necessarily a disaster; after all everyone needs to borrow once in a while, whether they’re buying on credit, dipping into their overdraft, taking out a bank loan or availing themselves of the occasional payday loan. But if you feel that you are drowning in debt and you truly want to get out from under, here are some steps you can take to get back into the black.

1. Sit down and figure out your total debt. You might be surprised how many people have only a vague idea of how much they owe. You can’t solve any problem if you are clueless about the extent of that problem. Accordingly your first task is to sit down and figure out exactly how much you owe and to whom you owe it. Be absolutely honest about this because if you aren’t honest you are only prolonging the problem.
2. Work out a budget. Once you know how big the monster is you can come up with a workable plan to slay it. Draw up a budget that includes a schedule for repaying your debt. The key is to make it realistic; figure out what you can really afford to repay whilst still staying within your budget. If you have no idea how to do a budget, don’t worry; there are plenty of resources to help you. Start with this page on the Money Saving Expert site.
3. Organise your bills. If possible, make arrangements to pay all of your utility bills via direct debit. This makes them much easier to manage and you won’t have to worry about sending out cheques on time or paying late fees. In addition, many providers give you discounts for direct debit payments. Your bank or the service providers themselves can get you set up for automatic payments. The only instance in which automatic payments might not be a good idea is if you are self employed or in some other situation where your income varies greatly from month to month. Sometimes you might need to pay bills a little bit late. But if they’re at all feasible for you, direct debits can make life much easier.
4. Figure out if you can save money by switching service providers. Re-evaluate everything: your utility providers, your credit cards, your loans, your insurance, your mortgage, even your bank. (With the rise of online banking, many traditional banks are fighting to keep customers, which may give you a bit of leverage with your present bank if you are interested in lowering fees or overdraft rates.) There’s a lot to be said for loyalty, and sometimes you’re better off sticking with your current provider and just negotiating for better rates or lower monthly costs. Some will be willing to work with you in order to keep your business. But if not…well, it’s a competitive world out there, so do some comparison-shopping and don’t be afraid to switch if you can get a better deal elsewhere. Money saved can be used to pay down your debts faster.
5. Exercise discipline. This is one of those things that’s easy to say but a bit harder to do. Discipline entails everything from watching your daily spending to refusing to borrow money or take on any more debts until you’ve repaid what you already owe. It may mean a moratorium on trips to your favourite high street shop; in fact, while we’re on the subject, it’s time to cut up those store cards. Store cards charge the most exorbitant rates for credit, so if you’re already in debt up to your eyeballs, do yourself a favour and do away with those cards now.

While debt may seem overwhelming right now it’s not a hopeless situation, and remember, you are not alone. Millions of people have been in the same boat and many have gotten themselves successfully out of debt. Don’t be afraid to seek out expert help if you feel you can’t do it alone. Check out StepChange Debt Charity; they can help you put together a personal budget and provide free debt advice. http://www.stepchange.org/Howwecanhelpyou/Debtadvice.aspx

Congratulations for making the decision to get your debt under control – and good luck!

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