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Managing Debt

If you\\\'re struggling to make ends meet and you\\\'re spending more money than you earn, you need to do something about it. Getting into debt could affect you for years to come.

Recognising debt

People who are in debt often make the mistake of ignoring the size of the problem, hoping it will just go away. Unfortunately, debt has a habit of hanging around and getting worse, so it\\\'s important to recognise the warning signs at an early stage.

If you\\\'re always short of cash, or you\\\'re constantly close to your overdraft limit on your bank account, then you should think about taking some action straight away.

Ask yourself where you\\\'d find the money if you had to make a big payment at short notice or in an emergency. If the answer is simply extending your overdraft, then you could be in danger of getting into serious debt.

Doing something about it

The earlier you start to tackle the problem, the easier it will be.  If your financial situation is in danger of becoming serious, do something about it now.

The worst thing you can do if you\\\'re having money problems is to just ignore the situation. It\\\'s often the case that people assume they\\\'ll be able to pay off their debt in the future when they start earning more money.

But anything could happen. Interest charges and late payment fees could mean that you\\\'re faced with a debt that\\\'s a lot more than you expected - sometimes double the amount you originally owed.

What you can do

If you are in debt, it might be that you\\\'ve lost grasp of your finances. For example, do you know exactly how much money goes in and out of your bank account and how often?

You can make a start by looking at your recent bank statements and finding out where you are spending money on things you could easily do without. By getting rid of these, your cashflow situation will get better quite quickly.

If your situation is a little more serious and you owe money to a number of people or companies, you\\\'ll need to start planning a budget and organising your various debts.

Once you know exactly how many debts you have and the total of each one, you can prioritise the most important ones and start to pay them off.

Once you\\\'ve recognised that you\\\'re in debt, you can begin to plan how you\\\'ll repay it. The easiest way is to organise your debts and then prioritise which are the most important.

Setting out your debts

The first stage to getting out of debt is to work out exactly how much you owe and who you owe it to. You can do this by taking a thorough look at your monthly bank statements and making a list of all your outgoings over the course of a typical month.

Prioritising your debts

The debts that you need to tackle first are the ones that have the most serious consequences if you miss a payment. If you don\\\'t address these debts as a priority, you could lose your belongings or be sent to prison by the courts. These types of debt include:

  •     rent payments - if you owe money to your landlord, you can be evicted from your home
  •     car payments - if you bought a car using a loan or hire purchase agreement, the vehicle can be taken away if you do not meet your repayment schedule

Other debts are classed as non-priority. This means that although you cannot have things taken away from you, they can still be expensive due to interest payments and can give you a bad credit rating, which leads to problems applying for loans in the future. These include:

  •     credit cards
  •     bank charges and overdrafts
  •     money you owe to friends and family

Starting repayments

Hopefully, your new budget will mean that you can allocate some money every month to meet your debt demands. But if you\\\'re still finding it difficult, talk to the companies that you owe money to.

It\\\'s important to do this as some lenders are willing to accept smaller monthly payments once they are aware of your particular circumstances.

Negotiating with creditors can be daunting and can take up a lot of time, so you may find that contacting a specialist adviser can make things a lot easier for you. You should make sure that any advice you get is free, independent and covers the whole range of possible solutions to your problems.

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