Debt Management Survival Plan

Many people are worried about how the credit crunch will impact on them and one their debt management strategy. News of falling house prices, increase in the cost of fuel, a lack of availability of cheap credit and bankruptcies soaring mean that everybody is worried about their debts and debt problems and how they are going top survive this credit crunch.

Here are my top debt management survival plan tips

1. Review your spending.
   Look at where your money is going on a monthly basis, if you don't know keep a spending diary detailing all spending down to the last penny. Your spending diary should include absolutely everything, newspapers, cups of coffee, parking, train fares, sweets, stamps etc. This can be quite a sobering experience, you should not be ashamed at how much you fritter away, everyone else does it! However, what you must take from this exercise is that you can identify where savings and cut backs can be made and implement regime where you are not frittering away your money and have control over your spending.


2. Review your income
   If you are in a lucky position of not worrying about your income then that's great, but for the rest of us who have mortgages, children, cars, pensions etc it is vital that we all look at ways we can increase our income. This could mean getting a better job, asking for a pay rise, doing overtime, selling on eBay or getting a part-time job or it could mean saving money from your spending review - it's a life choice really.


3. Pay off your debts
   The credit crunch means that it is expensive to borrow money, even for the banks. As a consequence the banks have increased the APR's on credit cards and personal loans to cover their increased costs. My first piece of advice would be clear off all your credit card debts asap. Use the snowball technique, paying off the most expensive credit card debt first, to attack your debts using any spare income you have which is why you need to follow steps 1 and 2 above first. Don't even begin to think about saving any money until you have paid off your credit card debts.


4. Keep to your plan
   You may not have realised it yet but debt management or financial management is not rocket science. The majority of those who have debt problems are as a consequence of lifestyle choices and the availability of cheap credit. The plan is quite simple and obvious, so obvious that many people feel stupid when they realise how easy it is. What is the plan? Keep your spending below your income level, fully understand where all your money goes and always look for ways to save money. Told you it was simple. Many will try and persuade you otherwise but it is that simple. What may be difficult is changing your lifestyle to spend according to your means. If that is too difficult to do you should implement plan B. Plan B is increase your income!

If you adopt the above strategy you'll be well prepared for the worst of the credit crunch and thereafter. The plan can be summed up in four words, live within your means.