Five steps to manageable debt

22/10/2018 Five simple steps to a stress-free situation.

Are we a nation drowning in debt? The news makes sobering reading these days. Over a fifth of all families have less than £100 savings and 8.3 million people meet the definition of suffering from problem debt. Meanwhile, the National Audit Office recently announced that debt is costing the national economy £900 million each year.

Options for people struggling to stay afloat can seem limited – which I was thinking of when I was speaking about Wonga a week ago. On one hand organisations like payday lenders exploit people struggling with their finances, but on the other, if no-one else is lending, where can they go?

It’s clear that money worries are a massive concern to huge numbers of us. So I’m working with leading consumer organisations and experts to come up with plans for affordable lending for people who need help to stay afloat. And I’d love to hear your ideas too.

In the meantime, if you’re struggling with debt, here are a few tips:

Acknowledge the problem. This is the hardest bit. Make yourself a cup of tea (or grab a glass of wine) and work out your incomings/outgoings for the month. I know it sounds like a nightmare but trust me, once you’ve made a list of what you owe and what you have coming in, you’ll feel a real sense of achievement. And if you’re finances are overstretched, it will help you get the kickstart you need to find help.

If you don’t need it, cancel it. Not using that gym membership? Old insurance policy that you forgot to cancel? Every little bit adds up – so ditch what you don’t need. You may be surprised what you find – I discovered that I was paying for three ‘cloud’ storage services recently along with another three music streaming sites I hadn’t signed up to. £80 a month in total!

Contact your creditors. The rules about financial difficulties are clear. If you’re struggling to meet your financial commitments and ask the business for help, they should come up with some solutions for you to help you buy some time while you get back on your feet again. They should also consider suspending interest and charges for a short period if it’s making your situation worse. This doesn’t mean money you’ve spent will be refunded, but it does mean that money you’ve been charged on top might be reconsidered if there’s a good reason for doing so.

Get a (free) plan. If your financial difficulties are ongoing, then speak to a free service like StepChange, a charity set up to help people get back on top of their finances. They’ll contact your creditors for you and negotiate payments you can afford. It’s not easy, but it’s a solution. Never pay for a debt management service – there are free options out there.

Be realistic. This bit sucks but I’m afraid it’s necessary sometimes. There are times when you look at your finances and it’s apparent you can’t afford your property. If that’s the case, speak to the mortgage provider about downsizing to a cheaper property. It’s a better option than defaulting on your mortgage. No-one likes dealing with problems that threaten your security. So if you’re worried about paying your mortgage then speak to the lender early on so they can come up with solutions for you. Resolver can help with any complaint you might need to make. If you’re having a problem with a rental agreement, there are mediation services through your local council. But again, the key here is to act before you get into serious trouble and you’ll have way more options.