Tips for Debt Management

The UK is going through a period of austerity drive the like of which we have rarely seen before. Faced with a national debt of billions the Government is launching cuts in the public spending which will result in the loss of thousands of jobs in the public sector, with further unemployment in related businesses in the private sector.

But behind the numbers of those who will be affected by these cuts are real people with real lives, bills to pay, roofs to keep over their head, and families to support. For these people debt is very real and very personal.

The UK has the highest level of personal debt in Europe; credit cards, store cards, loans, mortgage arrears all create a cocktail of depression, despair, fear, and hopelessness, which leave those affected feeling trapped in a cycle of poverty and hopelessness from which there seems no escape.

However there is a way out of personal debt no matter how bad it is. With education, and access to readily available information and assistance debt can be tackled, fought and overcome, and successful financial lives rebuilt.

If you find you find yourself in debt you will now have to make some tough choices:

1. Do you have a debt reduction plan?

You need to have a plan for getting out of debt. The reason for this is that most people struggle with trying to pay off a number of debts all at once and simply get nowhere, almost like a revolving door. This simply compounds the problem.

So here is some advice for your plan:

• List your debts in a schedule including your mortgage, credit cards, loans and overdrafts, credit zone, hire purchase and any other financial liability.

• Prioritize your debts by firstly identifying those which failure to pay may result in you losing your home or going to jail; Council Tax, Income Tax, and your Mortgage are your most important debts and must be your number one priority for payment come what may.

• Secondly, failure to pay utility bills such electricity and gas (but not water) will result in loss of service so these are the next priority.

• Debts such as credit cards, overdrafts, store cards and loans are also important, as failure to pay these can damage your credit rating but they are not important as those above. Do not therefore be intimidated by threats of legal action from credit card or loan companies, stick to your plan.

• Whatever your situation speak to your creditors, maintain contact if only to inform them what is happening. Staying silent is often interpreted by creditors as a sign of reluctance to pay.

Having a proper plan will help you pay your major debts off first, which will leave you with funds to pay off the remainder of your debts.

2. What can you do without or reduce?

To clear your debt you may need to undergo a period of austerity where you set about reducing your spending, and refining your budget so you look at your spending and see where you can make cut backs. Sky TV, eating out, foreign holidays may all have to be sacrificed in the short term to help you get out of trouble.

3. What can you sell?

Do you have things you do not need which could be a potential source of income? There is an ever increasing market for the disposal of unwanted items which can raise additional income. eBay, car boot sales, and the classified sections in the local papers are a few of the ways you can sell unwanted goods. Make a list of all your assets and get selling.

You may think that such an exercise is a waste of time, however, the reality is that any money you can raise, no matter how small, that you can put towards tackling your debt is worth it.

4. Can you find a secondary income?

You may need to seek short-term additional employment to supplement your income. The recent growth in the areas of network marketing and internet businesses provide a host of opportunities for secondary income. There are also the more obvious routes to getting a secondary income such as overtime, a second or part time job or letting a room in your home; do not rule anything out.

5. Do you need to get help or professional advice?

If you really are struggling you should consider seeking professional advice. You can get this from a number of organizations; the Citizens advice bureau or Credit Action being two. These organizations will offer advice and assistance in dealing with debt and in some cases actually try and negotiate arrangements with your creditors on your behalf if you find yourself in serious trouble. There is nothing to be ashamed of or embarrassed about in approaching these organizations, at least you are trying to help yourself.

A note of caution here; beware of rogue so called "debt management companies" offering to mediate with your lenders to get your debts written off for a fee. In many cases creditors will not negotiate with such companies and you may actually end up having paid a fee and still have your debts outstanding. There are some legitimate organizations which can assist you in negotiating with your creditors but you need to make sure you fully understand what service the company is actually offering, and how much it is charging, before you commit yourself.