Managing debt during difficult financial times can be a daunting task and leaves many of us feeling confused, stressed and under pressure. With the rising cost of living, a vulnerable economy and an uncertain future, you’re not alone if you’re finding it difficult to manage your finances efficiently.
Moreover, with increasing inflation and rapidly rising interest rates, managing debt has become a lot more difficult than before. However, while it may seem complicated, there are some steps that you can take to deal with your financial struggles and manage debt more effectively.
By making certain changes to your financial habits and developing a strategic plan to pay off your debt, you can make the best out of your situation. Yet, given its complexity, most people have trouble finding the right things to do while managing their debt in difficult times.
That’s why, today, we have brought you this step-by-step guide that will not only help you manage your debt but also get your finances in control for the future.
1. Analysing Your Current Debt
One of the first steps to managing debt is to properly analyse your current debt situation. Whilst this is often the hardest step to take, you’ll only be able to create a plan to manage it and start taking control once you understand the scale.
To start off, you need to first collect all your debt statements including credit cards, personal loans and any finance. Once you’ve got it all, it’s time to sort through and put together a plan of how much you owe, to whom and when do they need it paid?
This will help you find out how much of your monthly income is going into debt payments and how you can manage it according to your spending habits. Now that you have a deep insight into your current debt situation, it’s time to move on to the next step.
2. Organising and Prioritising Your Debts
To make sure your debt doesn’t cause you undue stress, you need to organise and prioritise it efficiently. Given that you have gathered all your bills and statements in the previous step, now, it’s time to organise them based on priority.
This will help you understand which debts you need to pay off first and which ones can take a backseat temporarily. Remember to consider your credit card payments and any finance first while prioritising. This is especially because not paying these in time may have a severe impact on your credit score.
By organising your debt, you can keep debt under control and eventually work to eliminate it. However, if you fail to do so, you might have to go through a lot of stress and your credit score might take a hit. Nevertheless, if you feel like you aren’t able to organise your finances, you can always take help from a professional debt counsellor or debt management company.
3. Creating a Budget
Creating a budget might just be one of the most important steps on this list. While analysing and organising your debt situation can help you be aware of your current financial situation, creating a budget is what will help you pay it off! Although it can be a challenging task, getting it just right will help you get rid of all your debt in no time.
Now the question is how do you do it? Well, the answer is very subjective as different people have different ways to budget their living. However, we are going to tell you the easiest way to do it.
First, make a list of all your expenses and minimum debt payments. Now compare it with your household’s monthly income and assign every pound to every task efficiently. Try saving as much money as you can to make your debt repayments.
Once you’ve created this, you can also try to increase your income with a few passive income sources to manage your expenses better. You will not have your budget. Now the only thing left to do is stick to this budget and you will see the results in no time.
4. Finding Out Debt Relief Options
While you’ve got a plan and budget in place to repay your debt, you might also want to look at debt relief options to reduce your debt as much as you can. This can be done through a variety of options like debt consolidation and settlement.
Debt consolidation is one of the most common strategies that can help you reduce your debt by consolidating it. How it works is simple. You take out a debt consolidation loan to pay off multiple loans, preferably at a lower interest rate. Not only does this help you avoid the stress of making several different payments, but also reduces your total interest payments by combing them.
Furthermore, you can opt for debt settlement. This is where you negotiate with your creditors to pay a lump sum amount now, which is lesser than the entirety of what you owe. To further reduce your debt and manage it effectively, you can always get in touch with a counsellor who will help you efficiently manage, negotiate, reduce and pay off your debt for a small fee.
Choose Salad Money For Fair and Affordable Personal Loans
Now that you know all about managing your debt in difficult times, it’s time you start working on paying off your debt.
However, if you need emergency money to manage your finances better, you can rest assured that Salad Money is here to help. As one of the leading low-credit personal loan providers in the UK, we understand that the traditional credit score system can be unfair to you.
That’s why, with our More Than Your Score loans, we aim to provide working employees with the best personal loans no matter what their credit score is.