Ask Away...: Are You Drowning In Debt? How To Stay Afloat When The Sharks Are Circling

Monday, November 7, 2016

Are You Drowning In Debt? How To Stay Afloat When The Sharks Are Circling

If you owe money, you may find yourself treading water in a rising tide. Before you know it, you’ve fallen behind on payments, you can’t pay your bills, and companies are chasing you. Debt is something that can affect us all. Even if you’re careful with your money, you can fall behind. If you are in debt, and you’re struggling to keep your head above water, here are some tips to help you stay afloat.

Doing your sums
If you’re in debt, you may have been reluctant to open letters from the bank or bills over the last few weeks. You may have gone months without checking your bank or credit card balances. The first step in tackling debt is to do some sums. Sit down with a calculator and a pen and paper. Check every single statement, and open all those letters have piled up. Write down the figures, and work out how much you owe in total. Make sure you include every store card, credit card, and outstanding bill. You’ll also need to factor in additional fees, such as interest and missed payment penalties.

This is a scary step forward. Often, it’s much easier to bury your head in the sand and hope that any problems magically dissolve away. Sadly, with financial issues, the longer you leave them, the worse they get. The sooner you have an idea of the numbers you’re dealing with, the better.

Prioritizing your debts
If you’re in debt, you may find that you owe a number of different people or lenders. When it comes to paying off debt, it’s best to make a list of priorities. Start with urgent demands. Have you been sent final reminders or missed mortgage payments? Have you got collectors calling you or visiting your home? Pay off these debts first. Next, aim to clear payments that are costing you money each month. If you’ve got a mountain of debt, it can be almost impossible to reach the summit because of interest and fees. If you owe people money, have a word with them, and explain that you’re struggling. Friends and family are unlikely to charge you interest, and they’ll probably understand if you’re honest with them. Nobody wants to owe money. But if you can talk to those that you have leant you money, you’ll feel better. It’s always helpful for both parties to be honest and open about the situation. You may find that they are able to help you cover other costs if you’re in trouble, and you need urgent help.

Getting advice
If you owe money, this can be incredibly stressful. It can keep you awake at night, and cause you to feel anxious and uneasy. It’s very common for people to worry about money issues. But you should know that you’re not alone. There are lifelines out there, and expert help that could prove useful. If you go online, you can search for a debt management guide, and talk to advisers using live chat. You could also look for financial advisers and debt management experts in your local area. When you see an adviser, they will ask you questions about your debts, and try and work with you to find solutions. It can be hugely beneficial to get professional help. Even setting out the situation can help you to make better sense of it. Using their expertise, a financial adviser can help you to work out a plan, and stick to it.

Clearing debt
There are various options when it comes to clearing debt. If you have savings tucked away, you could use them. Perhaps you’ve been putting money away for a new house or saving for a new car, for example. You may not be using the money as you intended, but at least it will get you back on the straight and narrow.

If you don’t have savings, you could borrow money from a parent or sibling. If you do this, you probably won’t have to worry about high interest fees, and you can work out a repayment plan that suits both parties. This may only be a viable option for some people, and it might apply to those with minor debts.

Another option is to take out a debt consolidation loan. This is often recommended for people who have significant debts. The aim of this approach is to use the loan to clear every other outstanding payment. Once you’ve paid off credit cards, loans, and missed bills, you have a clean slate. You’ll still be in debt because you’ve taken out another loan. But you won’t have the worry of firms chasing you and being unable to pay them. You pay back the loan in a single payment each month. As long as you don’t miss any payments, you shouldn’t have to worry about getting into debt again.

Preventing problems in the future
When you’ve paid off your debts, the last thing you want is to end up in the same situation again. You’ve been through all the stress and come out the other side. So focus on staying on an even keel, and moving forward. To reduce the risk of getting into trouble again, learn to budget. Budgeting is an essential tool that will help you get to grips with your finances. Always open letters, and keep an eye on your bank accounts.

Most people find it beneficial to do a monthly budget. But you can do it weekly or quarterly if this works better for you. To do a budget, all you need is to work out how much you’re earning, and what you need to spend. List anything you’ve got coming in, and going out. Include all your regular payments, such as bills and rent, for example. Then add any additional costs you need to cover that week or month. Have you got vet bills to cover or a school trip to pay for? Are you putting money aside for Christmas or does your car need work? Once you’ve noted down all the numbers, you can work out what’s left. If you do have money left over, why not open a savings account, and set up a direct debit.

Many people who get into debt find it hard not to spend money. If this sounds familiar, there are steps you can take to reduce spending. Do you succumb to the urge to buy things with a credit card? Do you struggle to save? If so, it may be best to cut up your credit cards or give them to a partner or family member to look after. Think about whether you actually need things before you buy them. If you’re getting back on track, you’ll soon get used to missing out on a few luxury items.

Sometimes, debt can arise from an addiction to spending or shopping. If this is the case, counseling can help you to identify possible triggers, and find solutions.

Debt is a very common cause of sleepless nights and stress in modern society. If you’re drowning in debt, there are lifelines out there. Try and face up to the situation as quickly as possible. The sooner you start to make inroads, the better. Work out what you owe, and try and prioritize payments you need to make. Seek help from a financial adviser. It can be incredibly nerve wracking to take this step. But there are people out there who can get you back on track. It may take a while, but the sooner you take action, the better.

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