Debt. It’s a word that gives all of us the same sensation, and a burden which, in varying capacities, can weigh us down. But these are challenging times, and it’s fair to say that the stigma for many surrounding debt has changed from one of borderline shame to begrudging reality. But it’s quietly becoming a big problem for our country, with 2.5 million Brits now dependent upon credit cards for day-to-day living, and total consumer debt rising by 10 per cent in the last 12 months.
We’ve all had to dip our toes in the credit card waters occasionally – not least of all when it comes to our children’s birthday celebrations or Christmas. But no one wants to get into a debt spiral and set foot on that slippery slope. The good news is that the road to debt freedom doesn’t need to be a long and arduous one. Just a few tweaks here and there can set you on your way so that you can not only get your head above water but establish long-term financial security for you and your family.
A budget facelift
Chances are, you won’t need to make any dramatic changes to your spending, and it’s always easier than you think to free up space in your monthly budget without making major sacrifices. But a good starting point is to write down all the things you spend your money on each day. Keep a record of it; even if it’s just for a week. At the end of it, ask yourself: “Where can I cut down on costs?” Do you buy food out instead of a packed lunch? Could you look at buying clothes and other good second hand? Could you shop in bulk and save? Or consider free activities for your children, instead of pricey ones? All these things make a big difference when added together, and there are good tools to help you get to make these savings.
It’s easy to put a monthly figure in your mind as to what you need in order to get by. But every month is different. Think Christmas, birthdays, holidays, or big one-off purchases (eg: furniture). To avoid the shock factor when these events come around, why not set up multiple accounts, and squirrel away a few pounds into them during ‘normal’ months. That way, you’ll have your bases covered when it comes to those irregular, unexpected purchases.
Get debt savvy
Take note: interest matters. And credit cards in particular charge a lot! So if you have multiple lines of credit, channel all your energies into dealing with the most expensive debts first, even if it means you’re just making minimum repayments on your cheaper debts. This top-down approach will mean you start saving from day one. It may even be worth looking at getting a personal loan to consolidate your debts, thereby cutting the head off the monster.
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Another effective option if you have high credit card debt is to look at a balance transfer. Here you simply transfer your existing credit card debt onto a card with a new provider, who in turn gives you a window (sometimes up to three years) in which they charge no interest or fees. That way you can chip away without fear of the debt getting away from you. Careful though – if you don’t pay it all off within the window, the charges can be hefty!
Debt management plans
For those with more severe problems with debt, there is the debt management plan option. In this case, you make payments to a company, who then shares this money around with your various creditors in order to pay them off. Companies such as Payplan do this without charging any fees, thus making it a perfectly viable option if you would like to avoid the burden of deciding the optimal amounts to allocate to each debt.
Of course, not all debt is bad. Something like a mortgage is actually an achievement for our generation, and there are many ways in which debt can help to set us up for the future. But of course, the end goal is always going to be financial independence and a clean slate from any such obligations. But as the above shows, you can achieve this sooner than you think, and without having to give up too much in the way of time, effort or pleasure. So don’t delay, and get moving on a plan that suits you today.
This is a sponsored post on behalf of Lending Works