When you owe money to a wide range of people – banks, credit card companies, the tax–man, a pay–day lender – it's fine if you have enough money coming in to cover the repayments easily. But for many people, it's all too easy for debt to get out of control. If you're finding it a stretch to meet all those repayments, it can be a frightening situation.
The first things to pay aren’t necessarily the biggest bills, they’re the ones that keep a roof over your head. Your mortgage or rent, utility bills, council tax, secured loans or child support payments – anything that could lead to you losing your home or facing court action need to be top of the list.
Next on the list are repayments for bank overdrafts, mail order catalogues, hire purchase agreements or payday loans. These should come second to your top priority debts but they’re still important as missing payments can lead to enforcement action and also damage your credit rating.
Plan your repayments
Itemising all your repayments lets you know where you stand, but won’t solve the problem if you’re still finding it hard to make ends meet. This is where budgeting comes into its own. Using a service like MoneyVista or just a simple spreadsheet, you can list everything you earn and all your regular bills and repayments. You’ll be able see what you have left to spend – giving you the knowledge you need to make some tough decisions. This could mean cutting your daily cappuccino, or it could be more serious like cancelling a satellite TV subscription.
Constantly review your cash flow
Keep your repayments under review and see if there’s money to be saved by switching some of them. If you have savings, consider using some of them to pay off your most expensive debts such as credit card loans, especially if the interest you’re earning is less than the interest you’re paying out.
If all of this is still leaving you with a hole in your finances at the end of the month, don’t bury your head in the sand. You are not alone and there is help available. The first step, however, is to let your creditors know. This should stop them taking action against you. Then seek advice on negotiating with your creditors from an agency like Citizens Advice or the National Debtline.
Managing your debt using a few sensible rules will help you tackle the situation calmly and navigate your way into smoother financial waters.