If you are in debt you are not alone, it is estimated that the average household debt in the UK is £15,385 which is owed to credit card firms, banks and other lenders. This figure is according to the TUC who said that average household debt rose in 2018 after years of wages not rising and austerity causing more families turning to borrowing to see their finances stretch to the end of the month until next payday.
The combined amount owed by British house holds rose to a staggering £428bn in the 3rd quarter of 2018. These figures are nearly £900 more that households owed in the previous 12 months and the level of unsecured debts seen as a percentage of household income is now 30% which is higher than it has ever been. It is worth noting that these debts do not include mortgage debts.
Debts are part of our lives and we all seem to have them on one form or another, whether those debts are in the form of mortgages, personal loans, credit card debts, payday loans or car loans they are something which we see as part and parcel of living in the west.
Having debts is not always to be a bad thing, it all depends what you owe the money for. If you borrowed to purchase asset which are bringing you an income then these can be considered good debts, if you have debts due to irresponsible spending on nights out and buying the latest fad gadget then these are bad debts.
Which ever types of debts you have would you not like to pay down these debts are quickly as possible. Here are 5 suggestions on how you could start to make that happen.
Getting help to manage your debts
As a nation we really do not like to discuss money let alone the debts which we have. Not an easy thing to bring up during a conversation with friends and family but if you are having a hard time paying off your debts it can be helpful to discuss them with your friends and family as they maybe be able to offer you advice to getting you on the right track to paying off the debts.
They might not in the future expect you to have to go out on the town as often and have a get together at home instead or Christmas and birthdays they will not expect you to splash out of expensive gifts and accept that your company is enough.
There are also many organisations which help put you into contact with debt advisors who can work with you to create a debt management plan and act as middle men between you and your creditors to come to an arrangement to pay down your debts in a way which puts less stress on your shoulders and keeps the creditor happy that at the very least you are paying something rather than nothing. Always remember that the lender ultimately wants the loan to be repaid in full and if it takes a little longer than not at all then most lenders will take the little longer option.
. Start to Prioritise your debts
If you owe money to multiple lenders, then it might be an idea to work out which of the loans are important to pay off first. For instance, if a lender is threatening to take you to court then those are the loans which you need to consider first. We have an article on how to manage your debts where we list priority dents like court summons, utilities and mortgages. Once these are sorted you will need to start looking at overdrafts, credit cards debts, payday loans.
After you have worked through your priority debts you will want to next consider the smaller debts which you could pay off by taking out a debt consolidation loan to make many smaller debts into one more manageable payment each month. One loan will also mean lower interest rates and this ill mean paying off your debts faster.
If you have outstanding credit card debt, why not look for a credit card which offers an interest free period on balance transfers. If you are able to transfer your outstanding credit card debts to the new card it will mean you can repay the debt without incurring any further interest. But make sure you check for any balance transfer fees and that you repay the outstanding debt before the interest free period expires or you’ll end up paying more unnecessarily.
Keep track of all your Expenses
Keep an eye on what you spend your money on seems fairly basic, but it is something that pretty much everyone over looks. The lunch time coffee and sandwich which is only £4.5 will soon add up to a large amount of the course of the year.
If you were to pause for a moment and jot down everything you have purchased in the last 30 days you’ll see there are lots of little things which you could have done without for instance, that drink after work, or that bag of crisps in the petrol station when you filled up all start to make holes in your bank account.
It does take a little discipline on your part to pack your own lunch and wait until you get to the office to make a coffer or arrive home to have a glass of wine. Why not open a bank account and deposit all the money you would have spent on little things and see at the end of the year what you have and you might be pleasantly surprised.
Haggle for everything
Penny wise, pound poor. When we try to save money, we will scrimp and save every penny but let ourselves down when it comes to the larger purchases like for instance buying a car or larger home appliance.
If it important to get into the habit if always looking for a bargain when shopping, even if you manage to secure £50 off a £500 appliance it is still £50 you have in your pocket than in someone else’s pocket.
When you see a sale advertised don’t feel pressured into rushing out to the shops to spend your hard-earned cash on an impulse buy. Simply put the idea to one side and think it over. Do you really need to spend that money, can it wait? Can you get it cheaper elsewhere? Can you make do with what you already have?
When you go out shopping always take a list with you and stick to the list, do not deviate one bit. If you can’t find what you are looking for then skip it and go without out. The same with online shopping, buy what you need and close your browser. Online shops are master’s in psychology, and they understand exactly how best to part you from your hard-earnt cash, resist the temptations and run. You want to get out of debt not further into it.
Stay home and save
Going out on the town nowadays is getting more and more expensive where a round of drinks costs you a small fortune and eating out requires you to take out a loan. Why not entertain at home. It is cheaper and more fun than standing around in a crowded noisy bar all night. Everyone can bring a bottle and snacks. During the summer you can go to the park and have a picnic, have a kick about and in winter you can all gather together and play board games. The money you will save doing this can be counted in the thousands in one year alone. Enough to pay off all your debts and start saving for something special like a property.
If you really want to start paying off your debts requires you to be committed to doing so and be disciplined enough to change your lifestyle to match your income.