How start a budget to deal with debt

The recession is hitting people hard – repossessions are up, insolvency is on the increase, businesses are failing, credit is increasingly hard to get and people are spending less. Many individuals are feeling the full force of the crisis as lenders become more robust in getting their hands on the money. Although debt seems insurmountable, there is a way to manage it and deal with it. Much of its power lies in the fact that people prefer to hide from it rather than confront it. The sooner this happens, the sooner that you can begin to tackle it. The following points are basic but are a good place to start.

• Write a budget. By doing so, it will be easier to see how much you have at the end of the month to tackle any debt that you have. You will be surprised by how much money you save by not having your daily Starbucks latte.

• When budgeting, make sure that you prioritise the debts that need to be paid off. Student loans are not classed as ‘bad’ debt (and do not affect your credit rating) so can be left till much later. Credit cards, utilities, mortgages and secured loans must be dealt with. Unsecured loans, although important, can be left further down the list.

• Contact your creditors and explain things to them. Many will understand and may be prepared to be flexible with regards payment. Get professional help where necessary but do not commit to anything until you have discussed it and thought carefully about it – IVAs and bankruptcy should be considered only as a very last resort.

• Consolidation loans are not for everyone. If you do decide to go down that route, cut up the credit cards and the store cards and set reasonable targets for repayment.

• Try and make more than the minimum repayments. Paying more and often means you cut the repayment time significantly.

So these are just some of the tips to help you get started. Hope they help.