Every four minutes and 51 seconds someone is declared insolvent or bankrupt in the UK, while the average British household is over £54,000 in debt (including mortgages).
These are shocking statistics, and can perhaps help to explain why so many people in the UK are seeing their stress levels soar.
Financial problems such as debt may be hard to accept and deal with emotionally, but there are ways to go about reorganising your finances and start improving your situation.
Acknowledge your debts
Dealing with your debt means you need to admit that you are struggling financially. Having the right attitude is important for taking the essential steps to climb out of debt.
Detail your income and expenses
Taking a realistic look at your debt situation should start with a list of your income and expenses to pinpoint exactly where your money is going. Make sure you include all expenses such as your rent or mortgage payments, phone bills, weekly shop and any little treats such as a daily coffee.
This will help to highlight little expenses that you can cut back on to save money, and will identify how much money you have left over each month to tackle your debt after all your living expenses are paid.
Boost your income
Are there ways in which you can boost how much money is coming in? If you have a spare room why not consider taking on a lodger, or if possible try to work overtime or apply for a second job. This will only need to be temporary while you attempt to sort out your debts.
You may also be eligible for government entitlements such as:
- Income support – for those on low income and who meet other specified criteria.
- Incapacity and disability benefits.
- Job Seekers Allowance – for those who are unable to get a job or who have been made redundant.
- Housing benefit and council tax relief.
Prioritise your debts
Some debts are more important than others – especially those which have severe penalties if you can’t pay them – so aim to make these your priority. These types of debts tend to include rent or mortgage payments, council tax and electricity, water and gas bills.
Put together a long-term debt strategy
It is important to consider how you are going to get out of your debt in the long-term. It can be particularly beneficial to take out a debt consolidation loan which will stop creditors from chasing you for payments. You will only need to make one payment towards the loan and the interest rate will be lower than what you are currently paying.