Cost of Living Campaign – Price Watch – How to manage your debt as prices keep rising
WHILE PEOPLE are struggling to make ends meet as inflation, fuel, utility bills and other costs soar at an unprecedented rate, the future looks uncertain for many.
With the current cost of living crisis the UK is going through, plus the added uncertainty of the current geopolitical climate, many Britons are more concerned about their financial situation than ever.
Debt relief agency StepChange has reported a 34 percent increase in people using its resources from December 2021 to January 2022.
Independent finance broker Norton Finance describes how people can manage their debt to improve their financial situation.
Dealing with debt is a task that is only made more difficult when you don’t have a clear idea of what is happening to your finances. Sitting down to calculate your income and expenses can take some time, but it can save a lot of future work and uncertainty.
Norton Finance Director Paul Stringer said: “With 15 million Britons struggling financially, debt can be a daunting issue but thankfully we see less stigma as it’s an issue to deal with rather than endure avoid.”
He added, “By managing your debt carefully and planning a solution that works for you, you can begin your journey to debt freedom.”
Since we’re dealing with debt, the best place to start is to figure out what you owe, when payments are due, and in the case of multiple sources of debt – which debt has a higher interest rate.
Whether alone or with a partner’s income, look at your income sources to get a baseline for your monthly earnings.
Payments for a mortgage or rent, utility bills and groceries are inevitable. See where your money goes each month.
Are you saving for a life event? While dealing with debt is an important financial goal that you should aim to achieve as soon as possible, it is important to set aside money for life events like a wedding.
LET YOUR MONEY GO FURTHER
Now that you’ve looked at your income and expenses, are there areas where you could save money that could be used to pay off your debt?
Could you reduce spending on transportation, groceries, or luxury items like subscription services?
Once you have a clear picture of your finances, it’s time to really look into your debt and make sure you can stay on top of things. The following tips can help you feel in control of your situation.
Add your payments to a calendar – Knowing when your payments are due is crucial to staying on track when paying off debt. By adding them to the calendar, you ensure that you don’t get any nasty surprises from a forgotten payment, and you can also make sure that there are enough funds in your account for the payment.
Prioritize Your Debt – If your budgeting moves and spending cuts leave you with some money left over to pay off debt, it’s important to know where that money is best spent.
This would generally be higher interest debt, but if you have some smaller debt that could be dealt with quickly to free up funds and make a small profit to motivate you, then this could be a good option.
Make the Minimum Payment – If paying off your debt is proving difficult, try your best to make the minimum payments to avoid late fees and a knock-on effect on your credit score.
If it’s difficult to meet the minimum payment, instead of taking out a credit card and borrowing more to make the payment, talk to the creditor directly to request an extension.
One possible solution for people who have multiple loans to pay off is debt consolidation.
This would pay off your existing loans and combine your debt into one source with monthly repayments since you would only owe money to the debt consolidation provider.
A single provider can make managing your debt easier because there are fewer payments to keep track of and you can save money on interest and late fees.
It’s important to speak to a loan provider to assess your options.