Debt is something nobody likes and its not surprising that many people struggle to manage debt. Some people feel physically sick with debt worries while others bury their head in the sand and hope it will go away. If not managed properly it could potentially get a lot worst. The good news is that it is not difficult to get a grip of things. By taking action today and making a few changes can drastically improve your financial position.
Income and Expenditure is the place to start
The first thing to do is get all your bills, statements and any other financial information. You will need the most up to date figures and you may need to contact creditors to get the up to date amounts.
Once you have this information you will need to create an income and expenditure statement. This is simply and list of all the money coming in minus all the money going out. If you have not done one before then you can use the Free Spreadsheet provided here: Personal Income and Expenditure Spreadsheet.
Using the spreadsheet provide you will notice that all you need to do is enter the figures and it will calculate the totals for you.
If you are a home owner it will also give you an estimated potential equity. Maybe you wish to consolidate debt using the available equity in your home, however its worth exploring all options before doing this. Whilst consolidation can be a good idea, getting a loan to pay other loans may not. If you want a quick and free way to get an estimate value of your home you can try Zoopla.
Now you have the completed spreadsheet you can easily see what is coming in and what is going out and most importantly what is left over, if anything. It is important to note that the income and expenditure spreadsheet is a tool to help you manage your debts. It is a great place to start and you should not be put off if things aren’t looking good. The key point is to identify the issues and take action.
By now you should be able to see how much you got coming in, what is going out and what you owe to creditors. Depending on your situation will determine what to do next. Use the spreadsheet to work out how much you can pay towards your debts. Identify areas where you can save money giving you more money to pay your debts back quicker. If your paying interest on any loans or credit cards then your need to eliminate the highest interest rate ones first.
If you have creditors chasing and your struggling to repay the monthly amounts then you need to contact them as soon as possible. You will find that they are likely to offer help in repaying a comfortable amount which will be based on your income and expenditure. It may also be worth asking them to freeze the interest especially if the debt has already defaulted.
Questions to ask yourself:
- Can I reduce my monthly outgoings? (reducing the weekly/monthly shop or negotiating better deals on energy or other bills)
- Can I increase my monthly income? (get another job or do something online to generate more income) <Keep an Eye on this Blog for more on this>
- Am I paying off the right debts first? (higher interest rates first)
- Do I need to contact the creditor to arrange a personal payment plan?
Well I hope that helps get you started on the road to become debt free. I will be writing more tips on how to reduce outgoings and increase your income so please subscribe to my blog. Also feel free to leave a comment below.