Hard times can fall upon anyone for a whole array of reasons. Bad business investments, unexpected personal tragedy, irresponsible spending, theft, loss of belongings, destruction of property through natural disasters, addictions such as gambling… the list goes on. When cash falls low, or debts become unmanageable, we can find ourselves turning out our pockets, looking for a change in the back of the sofa and skimping out on basic needs such as meals. It’s nothing to be ashamed of. It’s surprisingly common: more of us have been in this situation than haven’t. People just tend not to talk about their misfortune publically. But regardless of the reasons for your struggles, rest assured that there is always a way out of financial disaster. Remember, no matter how little you have or how much you owe out, there’s bound to be a businessperson out there somewhere who has turned around a much worse situation. So, don’t give up hope. It’s time to start thinking positively and being productive. Here are a few ways that you can help yourself get out of the red and back into the black.
Face Up To Your Finances
When you know that money is tight and bad news is around the corner, it can be easy to bury your head in the sand. An astounding number of people ignore phone calls from lenders, leave letters marked urgent unopened and continue spending despite knowing full well that they don’t have the necessary funds to support certain lifestyle choices. The first step towards getting your finances back on track is to face up to your situation. It’s time to start answering those phone calls, reading those letters, listening to voicemails and surveying your current monetary matters. This may take a little time but will be worth the effort as you will become fully aware of your situation, which then allows you to work on ways to rectify it. Sit down with a pad and pencil and get your bank statements together. Start by noting down your total income after tax. Then deduct your essential outgoings. These can include bills and essentials such as food and drink (though you should start reducing these costs by cutting out branded or unnecessary goods and replace them with cheaper options). The total left is your disposable income. This is how much you should be spending in the given period of time you’re looking at (whether it’s monthly or annually). Chances are, your outgoings exceed this number and that’s why you’re facing problems. Next, note down all of your debts (including interest rates that need to be paid). You will now know what money you have to work with and where it needs to be spent.
Take a Look at Your Interest Rates
The debts with the highest interest rates are the ones that you need to tackle first. Why? They are the ones that will cost you the most, in the long run, so you might aswell get them out of sight and mind as soon as possible. You can then work your way down the list so that you are clearing debts while spending as little in interest as possible.
Consolidating Your Loans
If you owe money out to varied sources, you may find it easier to consolidate your loans. This involves taking out one large loan, using the funds to clear your other cards and owed money. Then you can pay everything back to one, single source. This will help you to avoid late payment fees and charges, as you will only have one repayment date a month to remember. If you choose wisely, your loan may even have a lower interest rate than your current loans. This means you will pay less back in interest over time too! If you are in a difficult financial situation, you may find that you have difficulty finding someone who will act as a guarantor, as people may worry that you won’t keep to your repayments and they will be left with your debts to clear up. But not to worry, there are companies who will offer loans without guarantors out there. So, be savvy and start scouring the market for the best option available to you.
Considering Bankruptcy
If you are in a really difficult situation and cannot see yourself ever being able to clear your debts, you may want to start considering bankruptcy. Creditors who you owe money to can also apply for you to be made bankrupt, however, they can only do so if you have debts that exceed £5000. There are several advantages of going bankrupt: you no longer have to deal with the pressure of owing your creditors money, you can keep certain items you currently have (such as household items and sufficient funds to live on), you will no longer have to face any court action pertaining to your debts, and the majority of money that you owe can usually be written off. However, bankruptcy also has major drawbacks, so it isn’t a decision to be made lightly. You will have to pay a £680 fee and the order will have a significant impact on your credit rating for 6 years, making it highly unlikely lenders will show interest in you for the duration of that time.
Budgeting
As things start to look brighter, it’s time to start budgeting. This is a simple financial practice that will ensure that you are able to continue to make repayments reliably, or that you don’t find yourself slipping back into the depths of debt once you’ve managed to clear your loans. Working out how much you have to spend and sticking to this amount will teach you to live within your means. If possible, try to keep a certain amount of money out of each pay packet and add it to a savings account. This will ensure that you have a backup fund for emergencies and rainy days down the line.
Progress will take a significant amount of time but have patience. The end results of being debt-free will be worth all of your motivation and effort. The weight of the world will be lifted from your shoulders and you will be able to move on with your life, without constantly looking over your shoulders worrying that lenders or bailiffs will be on your back. You can start building towards a better and brighter future without the gray cloud of debt constantly hovering over your head.
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