If your finances are in a mess, now is the time to take control. Sit down and work out exactly how much you owe and who you owe it to. Be honest or you’ll only store up more problems for the future. If your debt repayments take more than 20 per cent of your net monthly income you are entering a danger zone and must take steps to cut back. Writing down your incoming money and outgoing expenses is a great way to organise your finances and will help you see exactly where your money is going. When you start looking at your spending habits, you might be surprised by how much money you spend on small items that you could easily live without.
If you’re in a hole, the first step is to stop digging, see if you can stop any non-essential spending. If you have a major problem with credit cards, cut them up. If you’re not so bad with credit cards, at least put them away and don’t buy stuff online for one month. What’s essential? Obviously your bills, housing, auto, gas, groceries… Non-essential? Clothing, CDs, DVDs, books, magazines, gadgets.
Also try to switch to a cheaper loan or credit card and try different providers. You’ll probably be able to find a credit card or loan with a better rate than you’re paying now – particularly for transferred balances on cards (watch out for balance transfer fees). But remember that these special offer rates will rise considerably after an initial interest-free period – make a note in your diary to change deals again. Then start making regular payments to your creditors, even if you can only pay them a small amount. If your creditors see that you are committed to sorting out your debt, they will give you some leeway while you figure out your long term repayment strategy.
Categories : Debt Management