More than 50% of UK adults started 2020 in debt, with over 5 million people owing over £10,000 in non-mortgage debt. The trouble with being in debt is that it’s very easy to lose control. Once you start borrowing and accruing interest and you resort to using credit cards, debts can spiral out of control in no time. If you’re worried about your financial situation, here are some steps you can take.
Analyze Your Position
Many of us are guilty of avoiding opening letters or deleting texts that come from the bank before reading them. If you don’t check your statements or balances regularly, there’s a real risk your financial situation could be worse than anticipated. Bite the bullet, check your balances and write down all the debts you owe. There’s a difference between being in debt and being unable to manage your debts. If you have a mortgage or a loan, for example, and you’re up to date with your repayments, there’s no need to worry unless your circumstances change. If you’re using credit cards or you have multiple loans, it’s much easier to lose track of where you are and how much you owe. Analyse your position so that you have a clear understanding of your total debt and who you need to pay.
If you find yourself in a situation where you can’t pay bills, or you’re falling behind with your mortgage or loan repayments, it’s wise to seek advice as soon as possible. There may be a way of delaying payments or setting up installments for minor debts. If the outlook is more stark, and you can’t pay off your debts, don’t panic. There are options, which may be available to you, including debt consolidation or a bankruptcy proposal. We often assume that there isn’t a way out of crippling debt, but in reality, there is help out there. Reaching out to a debt counselor or a financial adviser can help you explore and understand your options and gradually work your way out of debt.
Take Stock of Spending
It can be very easy to lose track of spending in the age of contactless payments, direct debits and online orders. Splashing out on payday from time to time won’t land you in hot water, but if you spend more than you earn over a prolonged period, you could end up owing hundreds or thousands of pounds. Use a budget to regulate how much money you spend and make savings on regular outgoings and keep checking your balances and updating your budget to make sure it’s accurate and that you know how much disposable income you have available. If you are paying off debts, set aside a monthly payment and try and look for ways to avoid interest charges. If you have a credit card, for example, you could take advantage of a balance transfer option.
Many of us fear getting into debt and finding ourselves in a position where we can’t pay our bills. Sadly, this is a common scenario. If you’re in debt, hopefully, this guide will help you move in the right direction.