Collaborative Post
In the UK, the average amount of unsecured debt per household was around £65,510 at the end of February 2023. Although this figure does include mortgages, it is still indicative of how easy it is to get into significant debt.
Being in debt may invoke feelings of despair, helplessness and depression as it may feel impossible to get out of. But there are ways to help break bad financial habits and reduce that debt. Here are some tips to get you on the way to financial stability.
How Do We End Up In Debt?
Finances are an incredibly personal topic, so talking about your circumstances can be hard. Debt can occur for many reasons, which can pile up and add to each other.
Low income can lead to families being unable to afford monthly bills or save any meaningful amount. Living paycheck to paycheck can leave you feeling unsettled, especially if you are faced with an expected expense such as home repairs or ill health.
The cost of living cannot be ignored either, as basic foodstuffs and energy bills are increasing in price and your wage is struggling to cover everything. Turning to a loan may make the difference between keeping the lights on and feeling full after a meal.
It’s Time To Take Hold Of Your Debt
The first step to taking control of your finances is to figure out exactly how much you have and what the individual interest rates are.
By understanding the wider picture, you can create a repayment plan. Start by working out what you can reasonably afford each month. You will need to look at recent bank statements. You will need to prioritise debts that are essential, such as energy bills and mortgages. These need to be paid for you to keep your home and security.
Writing to your creditors is a good idea, as you can explain that you are dealing with your debts. You may also be able to propose a lower repayment offer to show that you are still wanting to tackle the debt. If you are struggling to pay debts across multiple providers, you could consider a bad debt consolidation loan. This will combine all your payments into one which makes it easier to keep track of.
Tackle Your Bad Financial Habits
Unchecked spending is another reason why people fall into debt, so tackling it can prevent you from falling into further debt.
Creating a budget can stop you from overspending. By allocating a set amount for food, activities, travel and other expenses, you may find it easier to stick to them. You may also find a little leftover to put into a savings account.
Although it can be harder, paying in cash can help you to visualise a budget. Once you have set your budget, get individual money wallets for each expense and stick to using them. You could even try leaving your cards at home to prevent the temptation.