The following is a guest post by Mark on behalf of ClearDebt. ClearDebt are a UK-based company, offering advice on Credit Card Debt, Debt Management Plans and getting an IVA.
Debt can happen to the best of us. It's easy to lose sight of how much you're spending when you make transactions with a credit card. And sometimes, a life-changing event like a lay-off can cause us to fall behind on our payments.
Debt can quite easily spiral out of control and lead to a poor credit record and the refusal of further credit. And with penalties for late payments and high interest rates, debt can quickly increase.
Where To Start When You Find Yourself in Debt:
Honesty is the best policy. If you are honest with yourself about how much you're spending and how much you're earning then you can create a budget. Draw up a list of your fixed expenses, like rent, your variable expenses, like credit cards and then compare that with your income. Check out this Budget Worksheet at The National Foundation for Credit Counselling. It'۪s useful for identifying all those little expenses it̢۪s easy to forget about. When creating a plan for paying off your debt, it'۪s important that you make goals for repayment achievable in a time frame that suits your pocket.
What Affects Your Debt:
Are you spending more than you're making? If you can reduce your expenses so they are less than your income then you have a chance to pay off your debt. If your expenses are greater than your income then your debt is likely to increase. An asset may enable you to consolidate your loan in one place. Or you could sell your assets to try pay off some of your debts. But you should realize that selling off assets, is only a temporary solution. The important thing is to get your expenses to a manageable level, so you can get out of debt and stay out.
Liabilities are legally binding obligations that require you to settle a debt and should be discharged to avoid the possibility of incurring even more debt.
How can you boost your income and reduce your expenses? We'€™ve already seen that knowing what they are is a great start. But how can you increase your income? If you have an asset like a home, you could rent a room. You could look for a higher paid job. You could set up a small business based on an interest, or a part time job.
To reduce your expenses, think about which you can eliminate, and which might have cheaper alternatives. For example, if you travel by train, is there a bus that could get you there cheaper? Could you opt for supermarket own-brands of certain products? Could you limit the amount of certain products or services you use?
What To Keep An Eye On:
If you are already in debt then you want to make sure it doesn̢۪t increase. Set up regular payments to cover a certain amount every month. Check all your statements and know what each payment is.
Monitor expenditure; allocate yourself weekly expenses in cash so you know where each dollar is going.
What to Do if You Can't Cover Your Expenses:
If you find yourself in the position of being unable to cover expenses then it€'s time to seek advice from a debt counselor who can help you with consider your options. The services they will discuss with you might include consolidating debt into one payment, borrowing against your home, using a retirement savings plan, Debt Management Plans, Debt Settlements or filing for bankruptcy.
There are also a number of great blogs around filled with money saving tips that can help ease the burden of debt.
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