If you are in debt, and especially if you are struggling to make your repayments, you know only too well the stress and anxiety this can cause. There are many levels of debt that people get into. In this article, we look at a few things we can all do right now to start bringing your debt under control.
Step 1: Do Your Numbers
You may have heard this 100 times before, and it might be the most boring solution, but also the one that can have the biggest impact!
In 2008 I had severe debt problems, credit cards, loans, mortgage, all of which I thought I was not going to be able to pay. The key starting point to sorting this problem out was to get all my paperwork out. This includes bills, bank statements etc. I put everything into a spreadsheet. So much of the issues around debt relate to your emotions. That feeling that everything is closing in on you, and there is no way out. It is truly amazing the effect of sitting down and seeing in black and white the actual numbers. What you specifically owe, to who, etc.
Bringing Your Debt Under Control – The Process
The process of doing this starts to get your mind working on solutions. It gives you a feeling of taking ownership, which is so important. The opposite approach of ‘sticking your head in the sand’. Ignoring the paperwork, hoping it will go away, literally only makes the situation worse, the people you owe money to will not all just disappear!
So start taking control of your situation, get all your paperwork out, and a large cup of tea! Start working out your budget.
Step 2: Cut up your credit cards
For many, this is the most painful step of all but there can be no avoiding it! Take the scissors to those credit cards.
The problem with buying now and paying later (as you do with a credit card), is that the mind does not really challenge itself on whether it really needs that thing now. So it’s easier to buy things you absolutely do not need. Credit cards can also come with high-interest rates. Especially if you roll the balance over from one month to the next, so this makes every day spending much more expensive.
Bringing Your Debt Under Control -Step 3: Consolidate your loans
When you consolidate your loans, you are taking out one larger loan, to pay off a number of smaller debts (credit card, overdraft etc.).
The idea is that the larger loan has a lower but manageable monthly repayment, so lowering your costs, and helping you to cope with the debt.t also can help you simplify your life by only having one debt to deal with compare to multiple smaller ones. So in the situation where your monthly repayments are greatly reduced, thus making your debt much more manageable, this can be a good thing.
Bringing Your Debt Under Control – Final Thought
However, if your payments are not reduced by much, and the new loan has a much longer-term than your existing debts, you could end up paying more interest. You should therefore do your calculations and research before getting a consolidation loan.
