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How to take control of your debt

Let’s talk about debt. And more importantly, how to take control of your debt.

Many people are struggling financially at the moment and are finding themselves in debt, some for the first time. Debt can be worrying. But, if by speaking about it and forming action plans, you can take control of your debt.

It doesn’t need to overwhelm you and it certainly doesn’t need to dictate your future.

This post will cover:

  1. How widespread is debt?
  2. Should I worry about my debt?
  3. Paying off your debt
  4. How much can you afford to pay?
  5. What if I can’t afford to pay off my debt?
  6. Where else can I find information and/or support?

How widespread is debt?

Debt is very common. If you’re in debt, don’t worry. You’re not alone at all. In fact, if you speak to your close friends and family, I’m sure you’ll find many of them also have debt, or have done previously.

Recent research from money.co.uk found 78 percent of UK adults started the new year in debt. This figure does not include mortgages, meaning just 22 percent don’t have some form of personal debt.

Most concerningly, 35 percent attribute their debt to ‘normal living expenses’. People simply can’t afford to live the life their leading. This could be due to a range of factors, such as lifestyle inflation or simply spending too much money. But, for many, their income just doesn’t meet basic living requirements.

The average amount of debt owed is £9,246 – a significant sum.

Should I worry about my debt?

You need to address your debt or it will continue to spiral and grow. But, try not to let it keep you up at night.

The important thing is to address your debt and make a plan. Once you’ve done this, hopefully it will feel like a weight has been lifted.

You do need to address your debt, otherwise it could have a negative impact on your future.

Missing payments and building up debt will negatively affect your credit score. In turn, this will make it harder for you to get a mortgage or any form of credit you may need in the future.

If you take control of your debt, you can address these problems head on and have a healthy financial future.

Paying off debt

Paying off debt is obviously a good thing to do if you can.

However, your finances are like a diet. If you cut out all sugar, fast food and treats out of your diet overnight, you’ll make great progress for a week or two. But, you’ll be craving all the things you’re depriving yourself off and soon you’ll be eating far more than you did before.

Instead, small changes and living a healthy, but sustainable, lifestyle has been proven to be the best “diet” out there.

Apply this approach to paying off debt – don’t try and pay £1,000 a month straight away – unless your budget allows you to do this sustainably.

Instead, start with small amounts and build it up as you get used to it. For the first few months, simply not adding to your existing debts may be a victory!

How much can you afford to pay?

The first step is to make a budget.

Calculate all your monthly expenses – rent/mortgage, bills, council tax, food, etc and see what that adds up to. It may also be worth setting aside a portion of your income for ‘fun’ – whatever that might be for you.

However, in order to cut down your debt, you may need to make your ‘fun’ budget a bit smaller for the time being. It’ll be worth it to become debt free!

Once you’ve done this, work out how much of your monthly income is left over.

Is it enough to make all your minimum monthly payments? If so, that’s a great first step!

You may still have some money left over. Then, it’s up to you how you want to pay the rest of your debts.

One popular method is ‘snowballing’. Here, you make all the minimum monthly payments and then put all your extra money into paying off the debt with the highest interest rate. This tends to save you money in the long run because you have less interest to pay.

Other people prefer to pay off their smaller debts when they’re getting started. They get satisfaction from paying off a credit card – for example – in full and find it motivates them to get going.

In general, as long as you’re paying off your debts and your chosen method works for you, there’s no wrong way to do it.

What if I can’t afford to pay off my debt?

Once you’ve established you’re budget, it may become clear you can’t afford to pay off your debt yet, or can’t meet the minimum payments.

If this is the case – don’t panic! But, don’t bury your head in the sand and ignore it either.

Now is the time to get some external, independent advice. Contact a debt advice charity like StepChange, which provides free, confidential and expert debt advice and money guidance.

They will listen, without judgement, to your situation and talk through your options with you. Then, they will help you choose the right debt solution for you.

These options could include declaring bankruptcy, agreeing an IVA or a DMP. These might sound scary, but they’re not. They’re just there to help you take control of your debt.

You do not need to pay for this service. There are many unscrupulous firms that will charge you for advice, but not actually help you as much.

Where else can I find information and/or support?

Organisations like StepChange and The Money Advice Service are great starting points.

There are also lots of other money bloggers talking about debt. Many of them are offering inspiring stories and have specific knowledge about certain aspects of debt.

This is a really good round up of lots of the other posts out there that will help you take control of your debt.

If you found this post interesting, please like it and share across social media or send it to your friends. I’d also love to hear your thoughts and experiences. Have you struggled with debt? If so, how did you take control of your debt? Do you have any tips to help others deal with their debt? Share your thoughts below!

Don’t forget to follow me on social media @Katie20Percent to keep up to date with all my latest posts and content!

By The Twenty Percent

Hi I'm Katie and I use my blog to help young people take control of their personal finances.

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