One of the most crippling aspects of debt is that it works its way into so many different aspects of our lives. In practical terms, it can mean that you are not in a position to be able to live at the standard you want for you or your family.
But at a deeper level, a growing and uncontrolled debt problem is also hugely psychologically damaging. We all like to feel in control of our lives – whether it is in terms of the kind of things we like to do in our spare time, the percentage of our lives we dedicate to work, or the amount of disposable income we have to spend on the things that make modern life more fun.
Debt takes away our ability to control all of these things – and more – and that feeling of powerlessness is a big issue for many people in a spiralling debt crisis. The problem is growing, it is having a bigger and bigger effect on our lives, and we feel that there is nothing we can do about it. Well, over the years we’ve seen that actually there is plenty that can be done, with any debt problem, no matter how big. With that in mind, here are just a few of our tips to managing – and hopefully ultimately eliminating completely – any debt that you might have in your life.
- Start to deal with it, and start early.
One of the hardest parts of dealing with debt is that it can often feel like a many-headed monster. By its very nature, issues with money are interconnected – the money that you owe in one place might be able to be paid from somewhere else, but that in turn impacts another aspect of your financial and personal life. Unfortunately, many people react to this game of debt Whack-A-Mole simply by ignoring it – but this is a big mistake. Our first piece of advice when it comes to dealing with debt then is simply to start dealing with it – don’t let it grow and get worse.
- Understand the big picture.
But how do you do this? Well, the second piece of advice we’d give is to begin to tackle the debt issue simply by getting a very clear understanding of who you owe, and how much you owe them. It sounds obvious, but once again it’s all about just cutting through the intimidating mess that a complex debt problem can often turn into. So, make a list of all your creditors and the money they’re owed. The important thing here is that this list is a live document – use it as a reference point for your debt management plan, and update it regularly. Don’t just write it and despair!
- Pay what you can early, and don’t pay extra
Creditors often add late fees on to unpaid debts – an extra cost you can ill afford. So, a big part of managing your debt situation is to always make sure you are paying off those debts that are likely to accrue penalty charges early, before they do. We’d also recommend that if you’re in doubt about how much you can pay, then get in touch with the creditor early on and negotiate paying even a small percentage of the debt to try and prevent incurring late fees. Most debts will have a minimum required payment – find out what it is and at least pay that if you can to prevent your debt growing due to missed payments. As with all financial issues, the earlier you start to try and engage with it the better.
- Prioritise the debts with the highest interest rates first
For many people, this means tackling their credit card debt before anything else. Credit cards are a very helpful way to get an easy, convenient line of credit when you need it – but they can also be a very costly way to quickly build up debt if you’re not able to pay them off in time. Credit card interest rates are generally high, so prioritise these payments over others if you can to prevent the debt growing. Once again, go back to your original list. Which creditors are going to charge you the most interest? Use the list to prioritise your payments, and focus on cutting your debt burden as efficiently as possible.
- Keep talking
Debt can feel hugely isolating, as the pressure grows on you to pay back money you feel you don’t have. That’s why it is absolutely crucial to start talking – and then keep talking – about the debt with other people.
By this we mean engaging in constructive conversations with your creditors about strategies for repaying the debt in a manageable way that works for all sides. But we also encourage you to seek out professional help if you feel you need it – for example in the UK, the online Money Advice Service is a great source of free, imp