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Unfortunately there is no golden bullet which will obliterate your debt. Debt, for many, is something which has built up over a period of time and so it will take at least the same period of time to get rid of it. There are many reasons for debt but few answers to the problems. Debt consolidation, debt management or insolvency is really the only solutions available today. However, no matter what the solutions are they can only be effective, only if there is control over the finances.
This ten point plan will help you deal with your debt and achieve debt freedom. Remember you are not alone with your debt problem. The neighbour with the new car or extravagant holidays may well be up to his eyes in it. Latest statistics support this view as the current estimates of personal debt are around the £1,400,000,000,000 or £1.4 trillion, quite a lot of money!
So many people who have debt problems only make things worse by ignoring it. It is understandable why they ignore the mounting debts as addressing the debts will only serve to make them feel stupid and silly about their situation. They are not silly or stupid they are opportunist who just kept on borrowing money because the banks allowed them to. What is silly and stupid is ignoring the debt problem, at some point the money will have to paid back. That some point can be now or when crisis point is reached.
If you have your head in the sand the best thing to do is to pull it out of the sand and then give yourself a good shake. Ignore any feelings of guilt and stupidity, you'll be good at this, and address your mounting debts.
Rank each of your debts in terms of what the harshest penalty is if you miss payments eg missing your mortgage payments would entail your home being repossessed. Once this has been done you will then be able to assess which one should be settled first after paying household essentials. Debt like credit cards, store cards and bank overdrafts all should have a lower priority than mortgages, but this doesn't mean stop paying them it just means, all things being equal you should pay your mortgage before your credit card bill.
This is an easy one, but painful. Sit down and work out exactly how much you owe. If necessary call or write to each creditor and ask for the most up to date balance. Take a long look at the number and work out exactly why you run up so much debt in the first place. Make this a cathartic experience and remember it and how it made you feel. Recall this thought each time you buy something and perhaps it will change your perception of money.
I can guarantee that at least one of your credit cards will be attracting an interest rate of around 25%. I can also guarantee that if you call the credit card company and threaten to move your balance they will either give you a lower fixed rate for the lifetime of the balance or just reduce the interest rate. If they don't give you a cheaper rate then move your debt elsewhere, there are plenty of takers!
Never just assume you are getting the best mortgage deal. Always check out what the best deals are every time your mortgage is up for renewal.
Reclaim any bank charges. Write to your bank asking them to reimburse you with all the charges they have lodged against your account. If someone owes you money make sure you get it back. Also make sure that you are not missing out on any tax benefits which you are entitled to.
This is a classic mistake; do not save while trying to pay off your debts. It's fine having a small reserve in case of emergencies, around £300, but no more. You savings will only attract interest rates of around 4% where your borrowings will attract considerably more, around 15-20%, it's a no brainer!
This should be your keyword. Examine areas in your household expenses where savings can be made. Start using cash for all your purchases and consider how long you have to work to afford each purchase, eg if you earn £10 per hour and you want to buy a jersey at £50 then you know that it will cost you over half a day's wages. You may then reconsider your need for the jersey. Do this for all purchases and you'll soon find that you have cut out unnecessary spending.
Why do you shop? Examine why you do recreational shopping. This type of shopping is adding to your debt so you need to stop it. You can always do without a jumper or coat but you can't do without a house. Find alternatives to recreational shopping, the best things in life are free, talking to your friends and children, going to nice walks and reading.
If you are having trouble paying your mortgage speak to your provider at the soonest opportunity. Don't miss a payment.
If after you taking your head out of the sand you find that your debts are overwhelming seek professional advice. No matter what level of debt you have there is always a solution. So don't delay, seek free professional advice at the earliest opportunity and start dealing with your debt.
Call Debt Watchdog free on 0800 970 2698 for free debt advice.
