Starting Your Debt Management Journey
Debt can sometimes be overwhelming, especially if you’re reliant on credit and have built up a lot of borrowing, but it's essential to remember that it's never too late to take steps towards making your situation more manageable. With some practical steps and additional support, it's possible to take control of your finances and begin reducing your debt.
For Debt Awareness Week, we're guiding you through assessing your financial situation and some different debt repayment strategies, in addition to providing some helpful tips to get you closer to your financial goals.
Assessing your finances
Taking the time to evaluate your financial situation can be incredibly helpful, especially if you're feeling overwhelmed or unsure about where to start. Whether you're in debt, struggling to save, or just looking to get a better handle on your money, there are a few key steps you can take to get a clearer picture of your financial health.
First, it's important to create an overview of your debt situation. This means adding up all of your outstanding balances on credit cards, loans, and other debts, as well as any interest rates and fees you're paying. From there, you can start to develop a plan for paying down your debts and minimising interest charges.
However, evaluating your financial situation goes beyond just looking at your debt. It's also important to look at your income, expenses, and overall financial goals. Consider your monthly income, including any irregular earnings such as bonuses or freelance work. Then, make a list of all your expenses, including fixed costs like rent or car payments, and variable ones like groceries or entertainment.
Once you have an overview of your income and expenses, you can look at your financial goals. In some cases, you might find that you have the ability to pay off your debt alongside other financial goals like saving up an emergency fund. Whether it’s solely to pay off your debt or saving a bit while you do this, having a clear understanding of your goals can help you make more informed financial decisions and stay motivated as you work towards achieving them.
Remember, assessing your financial situation is an ongoing process, and it's important to regularly check in and make adjustments as needed. By taking the time to understand your debts, income, expenses, and goals, you'll be better equipped to make smart financial decisions and build a more secure financial future.
Managing your debt
It's important to remember that there's no one-size-fits-all approach to debt management. Everyone's financial situation is unique, and what works for one person might not work for another. That said, some strategies are more commonly used than others.
One popular approach is the snowball method. This involves paying off your debts in order from smallest to largest, regardless of interest rates. By focusing on paying off smaller debts first, you can gain momentum and motivation to continue paying off your larger debts.
Another approach is the avalanche method. This involves paying off your debts in order from highest to lowest interest rate. By focusing on high-interest debts first, you can potentially save more money in the long run by reducing the amount of interest you pay.
However, if you find yourself struggling to make ends meet, paying off your priority debts, such as your mortgage or rent, should always come before non-priority debts.
Of course, these are just two examples of debt management strategies. There are many other ways to pay off your debt, and it's important to do your own research and find what works best for you. You might even want to consider speaking with a debt management professional for guidance. There are lots of free and independent advice services that can offer guidance for your situation, such as StepChange, Citizens Advice and MoneyHelper.
Aside from specific debt management strategies, there are also some general financial management practices that can help you get on top of your debt. Creating a budget and tracking your expenses can help you identify areas where you can cut back and save money. Building an emergency fund can provide a safety net for unexpected costs and prevent you from relying on credit cards or loans to cover them. Finally, identifying your money mindset can help you understand your financial behaviour. You can read our guide about the different money mindsets and how to use this to make positive changes that'll benefit your financial future here.
Remember, managing debt isn't a one-time event, but a journey that requires ongoing effort and attention. It's important to be patient and kind to yourself throughout the process and to celebrate your successes along the way.
Support with money worries
If you’re experiencing money worries, you’re not alone. Our support team at Wave, BetterBorrow and LiveLend are always here to help. Just log in to your account and get in touch with our team and we’ll help you the best way we can.
There are also plenty of free and independent advice services available to support you and help you make things more manageable. Just visit the websites below:
StepChange provides free debt advice to help you deal with your debt and set up a solution.
Citizens Advice offers free and confidential advice for debt and money management, benefits, housing and other life areas.
MoneyHelper is a free service provided by the Money and Pensions Service, sponsored by the Department for Work and Pensions.
Turn2us is a national charity providing help for those who are struggling financially.
Debt Awareness Week isn't only for those currently experiencing debt. Life has its ups and downs for all of us, so it's important to stay informed about different debt topics so that you're better equipped to handle these situations if they occur. And, many of us might also have friends and loved ones that are dealing with debt that need emotional support. Have a look through our additional Debt Awareness Week resources below:
- Learn more about the impact of debt on mental health and how to support loved ones that are struggling with debt
- Learn more about the psychology of debt: Understanding your money mindset