Debt affects a lot of people for many different reasons and the root of it differs for each individual, as can the reasons that stop someone from getting out of debt.
“I just don’t understand why I am still in debt, it’s impossible to get out of” is a fairly common statement and you may think that the sheer fact that you are reading this means you cannot possibly be in debt denial. Well, think again!
“I needed that new pair of boots for the hazardous winter weather”- you get the point – debt denial is more common than you think. Justifying your spends may be all well and good in the short term, but the long-term stress is not worth it. Just accepting that you need to make changes and that perhaps this winter you should recycle last year’s boots and put the £70 you were going to spend towards paying off a store card, will all help towards getting yourself out of debt.
Most people love the finer things in life, be it the odd treat to an exclusive restaurant or an upgrade to the newest iPhone. However, are these material goods and experiences really worth the stress of debt? Paying off an activity shouldn’t take longer than the experience itself lasted and next time you’re invited to the opening of a new bar, take a step back and think pragmatically. How much time would it take for you to pay it off after interest charges are added to your account? By accepting responsibility for your spending habits and making changes to your attitude, you are one step closer to getting out of debt.
You don’t budget
This may seem like an obvious point to make, but it is imperative. The first step to budgeting is to create or download a budget sheet, of which there are many available online. Write down how much money goes into your account per month and then input the amount of outgoings you have. Ensure you fill this in right to the last penny. There is no point in approximations when it comes to debt as you need to be able to see the clear picture! Being able to see where you are financially gives you a better idea as to how much you have available to put towards paying your debts.
It can be a great way of evaluating what you can do to cut the costs of your outgoings- do you really need a Sky package? Can your phone bill be reduced by using an older phone model? The savings you can make may not seem that great, but over time that extra money can really help in reducing what you owe.
You don’t actually know where your debts are
You may have opened a store card years ago or joined a new gym and not realised that there was a small payment outstanding, only to find yourself, years later, confused as to why your credit score isn’t as good as you had envisaged.
There are a number of ways in which you can track down what you owe. The easiest is to sift through all those unopened letters you have piling up. Through thorough reading you may find something you didn’t realise you were paying for and from this you can either include it within your budget of outgoings, or cancel the service if it isn’t a necessity. If you have exhausted this method, then it is time to opt for a credit record. You can get these for free often by signing up to websites and they will list all the companies and accounts that you owe money for. A credit record is crucial, especially if you have moved house at some point and there is the chance that creditors haven’t been updated with your details.
You can’t see the wood for the trees
Debt can be overwhelming and sometimes when you have various charges coming out of your accounts it can be hard to figure out where to begin. Is it best practice to evenly split your funds between all debts or should you focus on one at a time?
The obvious thing to think about is what has the greatest consequence if it isn’t brought to the forefront? Unpaid mortgage payments, for example, could result in repossession so this would be a priority. Following this, the accounts that have the largest charges need to be focused on. The more you can stop your debts from growing due to interest and charges, the better.