Pay your debts more quickly in 2021
It’s no secret, this year has been pretty rubbish in myriad ways. Coronavirus has changed so much for so many, not least of all, by leaving the world’s economy in a dire state.
Banks, both private and government owned, have recorded a huge increase in loan requests. Thousands of people have been made redundant, thousands of businesses have been affected by lockdown measures; even global corporations have taken a hit with share prices and stock markets dropping.
Having excessive debt does more than just reduce your spending power; struggling to make repayments can leave you unable to enjoy life, and not just in the fiscal sense, having debts that are spiraling out of control can leave you with anxiety related health conditions, struggling to put food on the table, and in extreme cases, homeless.
So, how do we make sure that our debts don’t become more of an issue than they already are? We’ve put together our top tips for dealing with debts and getting debt help that, if you can follow them, should help you to make 2021 the year that you get in control of your finances.
Make a budget
This can be time consuming, but it’s the first (and perhaps most important step) when it comes to creating a picture, and getting in control, of your finances.
Although it can take a while, making a budget is relatively straightforward. Simply list all of the income you receive on a monthly basis – include your wage/salary, any bonuses you receive, side jobs; anything that pays you an income.
Then, list all of your monthly expenses.
Start with your fixed expenses (they’re easiest, as they’re the same amount every month) – so, your rent/mortgage payments, insurance, car finance, utilities (if you pay a set amount – and if you do, switch so you only pay for what you use), phone bill, gym membership etc. etc.
Next, list all your variable expenses – so, food, petrol, MOTs, haircuts etc.
It can sometimes be difficult to quantify how much some expenses are every month, if this is the case, take a snapshot of 4-6 months and work out the average. You want to finish this process with a really clear view of your monthly cashflow; figuring out your budget and monthly cashflow is crucial to getting in control of your finances.
Stick to your budget!
This one couldn’t be simpler, and may seem obvious, but it’s often this first step that trips up the most people. Making a budget and sticking to it is the first step towards giving you peace of mind and financial freedom. Don’t make a budget and then continue to buy trainers and takeaways that you can’t afford.
Smaller debts first/figure out what you owe and prioritise
If you’re able to organise with your creditors so you can pay larger amounts to your smaller debts, then it increases your chances of striking debts, and thus creditors, off your list and will help to motivate you to continue, as you’ll see full debts disappear from the overall list, as well as just see payments going out. This tangible progress is great for helping to keep you motivated to stick to your budget, and, in turn, achieve your goal of becoming debt free.
The only time we would advise against this, is if you have loans with higher interest rates that aren’t for the smallest amounts. If you do, pay as much as you can towards these to get them cleared as quickly as you can, it will save you money in the long run.
Consolidate your debts if you can
Ok, this may seem like a “borrowing from Peter to pay Paul” kind of strategy, but it really can work if you do it carefully.
Granted, you may be in debt for longer. However, if you’re careful, this can leave you with more immediate financial stability as you’ll have only one repayment each month, rather than numerous repayments, and, it’s also likely that that one payment will be a smaller amount than the cumulative total of the multiple repayments you were previously making.
The only downside to this method is that it won’t work for everyone. To be able to do this, you’ll need a good enough credit rating for a loan company to agree give you a loan and a low interest rate.
Even if you do choose to use this method, you must make sure that it is reducing your monthly repayment amount and not just getting you into more debt that you can’t afford – make sure the loan length and the rates associated are ones you’re able to stick to.
Change your spending habits & cut out unnecessary expenses
Whilst this isn’t definitively always the case, a large portion of people who find themselves in unmanageable debt are, or have been, spending more than they earn.
Think of your bank account similarly to your body: if you put more calories in than you take out, you’ll get fat. The only difference is, with your bank account, you want to be putting more in than you take out!
To avoid spending more than you’re earning, it’s worth changing your spending habits and cutting out unnecessary expenses.
Review the things you are subscribed to – does your Netflix subscription mean you never watch actual TV anymore? If so, consider cancelling your Sky/BT/Virgin package, consider cancelling your TV licence, as well – but, if you do this, make sure that you don’t watch live TV, or this will just land you in further debt!
If cancelling things feels too drastic, think of ways to make them more affordable – share a Netflix account with family or friends. Or look for ways to reduce the cost entirely while keeping the account – many mobile phone providers offer free subscriptions to Netflix & Spotify for switching your phone to them. Obviously make sure that your phone bill will remain the same or reduce if you do this, otherwise you’re not really making a saving.
Also, one we’ve already mentioned – do you really need those trainers and that takeaway? If buying them means you’re spending money you don’t have, then the answer’s ‘no!’.
Save money to pay off debts
Again, this might not be achievable for everyone, but if you can put any money away at the end of the month, do it, and pay it towards your debts. This is absolutely the best way to get out of debt more quickly than you would by making just the minimum monthly repayments.
Pay on time
Ok, this isn’t always possible if you’ve been overreaching with your finances, but if you’re careful, and do all of the things we’ve highlighted above, then this is well within your reach. And, when you do this, you’ll see your credit rating start to improve and your total debt begin to decrease steadily.
Both very good reasons to make sure that you pay on time, every month.
One final way to save money that you can divert to repaying your debts – switch providers for anything where you can find a cheaper deal elsewhere.
Utilities – are you paying too much? Use a comparison site and find out if you can reduce the amount you’re paying.
Phone bill, TV? Do the same.
Even things like fuel, is there a petrol station within a reasonable distance that charges a penny less per litre? If so, use it, this could save you a few pounds over the course of the year.
If you’re already doing everything you can to get yourself out of debt and are struggling to, or can’t pay your debts, click the link below, fill in the form, and we’ll get call you to discuss your options – you could qualify for debt help that could allow you to write off some of your debts and reduce your monthly repayments.
We’re here to help
If you have money worries and need help with debts, just click the button below, fill in the form and we’ll call you to discuss your options. You might be surprised at how much a Scottish Trust Deed, Debt Arrangement Scheme, Minimal Asset Process or Sequestration could help you to get out of debt in Scotland.
Scottish Debt Help – we could be just the helping hand you need.