Dealing with debt is one of the most important tasks when managing your money. While it’s very common to be in debt, there are several different scenarios that can arise when you owe money. If your debt level is increasing, or you’re finding it more difficult to keep up with repayments, here are some steps to take today.
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Analyzing your finances
It can be tough to keep track of your accounts when you have multiple direct debits set up, you can tap a card to pay, and you purchase items at the touch of a button. If you tend to spend money without really thinking about it, or your balance is usually lower than expected when you look at your mobile banking app, it’s wise to take a good look at your statements. Check your balances for every account, review transactions, and take stock of your financial situation. Write down how much money you owe in total and note down the details for each individual payment.
Draw up a budget
Budgeting is one of the most effective ways to take control of your money. It is particularly beneficial to monitor spending and set limits if you are trying to clear debts and prevent further borrowing. Your budget should contain figures for your income, your regular outgoings and one-off payments you need to make in the month ahead. Once you have all the data in front of you, you can work out how much you can afford to either save or put towards debt repayments.
Repay your debts
There are two scenarios to consider when talking about debt. The first is manageable debt. If you’re paying a mortgage or a loan and you’re on top of the repayments, you don’t need to worry. If you can afford to pay back your debt, keep going as you are. The second scenario is more precarious. If you have debts that you’re struggling to repay, you are borrowing more money or you’re paying more in interest every month, it’s important to take action. There are multiple avenues to explore.
If you have high-interest debts, it’s worth trying to bring the value down as quickly as possible to save you money. You could do this by using any savings you have, you could sell an annuity or you could look into a debt consolidation loan. This type of loan is designed to help you pay off all your debts and start again with a single monthly repayment. The best thing to do if you are worried about your debts is to seek expert advice. Financial advisers can recommend products and make suggestions based on your individual circumstances.
Ask for help
Money worries are among the most common sources of stress, and during the pandemic, more and more people have found themselves struggling to repay debts. If you have concerns about your financial situation, or you don’t know how to go about trying to clear debts, reach out. Contact financial advisers, charities and nonprofits that offer free advice and helplines and research online. There is help and support available, and there are always options, no matter how bad things get.
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Debts can spiral out of control, and it’s always wise to try and maintain a firm grip on your finances. If you’re keen to start tackling your debts, take these steps today.
