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With the current situation many are struggling to manage their debts. Some have been furloughed and are trying to support families on 80% of their normal wage, some have reduced hours and others have been made redundant. Many of us have set amounts of income that come out each month to pay off mortgages and other forms of debt. It is important to find ways to improve your situation so that the thought of your debts is not keeping you up at night.
This means finding a reasonable means of managing your larger debts. In this article, I look at what options are available to help pay off larger debts that don’t involve selling any body parts.
Obviously, if you’ve been made redundant it makes sense to start looking for alternative employment as soon as possible. There are plenty of jobs available, you just need to make the effort to look.
Who Do You Owe and How Much?
Lists can help you keep organised and make tackling your debts more manageable. Create a list of those you owe, when payments are due and how much. Also, record how much interest you need to pay. Where possible pay off debts with the highest interest rates first. Having all the information in one place it allows you can see clearly what you need to pay and prioritise them in a way that suits you.
One of the most basic things that you will need to do if you want to manage your debts is to pay on time every month. The agreement with the creditor will have a specified date on which you need to pay off the minimum agreed amount. Failure to make a payment on time results in additional charges. This increases the money you owe and will also affect your credit rating.
Creating a calendar of when payments are owed and when your pay comes in can help keep on top of things. I find that having direct debits for the minimum payment set up can really help take the stress out of remembering to make payments. Obviously, you’ll need to make sure you have the money in the account it is being paid from.
Budget
You should have a fair idea of what is coming in and going out moneywise. It makes sense to do what you can to make wages last longer. You’ll need to think ahead and prepare a spreadsheet of what is going out, coming in, and when, so you know how you stand financially in the coming months. This allows you to plan ahead also identify where there may be shortfalls or extra finances available. Where there are extra finances available it makes sense to place them in a separate account as an emergency fund. This will mean that if there are shortfalls you have a fallback plan. The emergency fund will hopefully grow. As it does this, consider taking out chunks to chip away at some of those debts.
Consider an IVA
It can be overwhelming when you can just about manage to pay off the interest on your debts. In such cases, there is a viable solution that could help. An IVA or an Individual Voluntary Arrangement is where you arrange to pay back what you can. They are legally binding contracts that are normally arranged for 5 to 6 years. Any outstanding debt after this timeframe is simply written off. It can be a great option if you find you simply can’t cope with the debts you have. There are of course certain criteria you need to meet in order to be able to use this. If eligible you’ll find you can be debt-free much sooner. You can even try an online IVA calculator to see how much this could help you.
Bringing Debts Together
Many of us have debts that are spread out in various places so consolidating them could be of value. Combining them as one debt means you have just one interest to pay and does away with having a few different creditors chasing you for payment. This can help make a large amount of debt feel more manageable.
In Summary
There are ways you can manage large debts although it is easy to feel distressed by the task. If you keep organised it can help give you control of your debt and where you feel it is out of your control there are still options to consider.
Are you on top of your debts? How do you handle your debt?
Let me know in the comments x
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Written by Melanie Edjourian. Please do not use these pictures without permission x
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Thank you for this advice! I am fortunate to not have any debts at the moment, but if I ever happen to be in that position, I will definitely refer back to this post.
That’s great to hear. Let’s hope that doesn’t change.
I am finally in a place where I am on top of my debts and let me tell you, it feels so good!
That’s great news Rebecca. I’m glad to hear it.
The easiest way is to prevent of having one. Just simply don’t spend more than you earn.. if you don’t have the money, dont do a debt. be creative
That’s easier said than done unfortunately. Not all can afford to buy a house outright for example. A mortgage is a debt many have.
As much as possible, I refrain from having any kind of debts. But for those people with huge debts, I think making an organized spreadsheet is a good idea.
It’s best to avoid debt but a necessary evil sometimes. Spreadsheets can be great to help stay organised.
My husband is the one who is better at keeping our finances in check. Although I do stick to our weekly budget, he is still the one who makes me aware of credit score, credit standing, outstanding debt, etc. etc. I will save this article for reference so that don’t have to keep on asking my husband for help when it comes to this topic. Thank you so much for writing this article.
Not a problem. Thanks so much for visiting.
It can be so stressful trying to manage debt, especially when there’s so much economic uncertainty around! We did have a little moment at the start of lockdown when my husband lost his job as we’re paying off a debt from our wedding, but luckily he found a new role quickly and we tweaked a few things in our life so that we could manage the debt effectively, including shifting it to a 0% credit card, which is a game changer. Of course that needs to be paid off long term, but it does give you some more flexibility.
Oh wow, well I’m glad he found a new job quickly. Flexibility can help although paying chunks off when you also can prove to be helpful. Good luck.
There is some really good avdice that is sound and sensible here for sure. I am sure many people will be needing this!
Thanks Melanie. Hopefully, these tips will be useful for those that need them.
Debt is a key component of anyone’s finance. If not taken care of properly, it can become an issue in the long-term.
That’s very true. It’s best to keep on top of finances.
Actually your points here are very logical because when it comes to money or debt everything is corelated and we should calculate our every expense.
It is important to keep on top of debts and have allowances to help reduce them as quickly as possible.
Your tips on how to safe money at this period of time is so helpful. I’m sure it will help many.
Thanks Ash. I’m glad you found this helpful.
I am happy that I am now in the place where I have no huge debts and mortgage (all paid off), and it is the best feeling.
Your advice surely will help who will try them all.
That’s great to hear. It is a relief when you’ve paid it all off.