Christmas is the season of goodwill and festive cheer – but it’s also the season of overspending. It’s all too easy to have a fantastic Christmas on credit…the hard part is paying it all off in the New Year! This article from debt advice specialists, Bankruptcy Clinic, will help you get back control of your finances if things got a little out of hand over Christmas.
- Take stock of your debts
The first thing to do is to work out exactly how much you owe and to whom. Your bills and statements may not make pleasant reading, but it’s better to bite the bullet than bury your head in the sand. As soon as you know the extent of the damage, you’re already in a stronger position to start putting things right – and it may not be as bad you think.
- Work out your budget
Next, work out how much money you can put towards your debts each month. To do this, look at your net income from employment and/or any benefits and tax credits you receive. Then deduct how much you typically spend on essentials such as rent or mortgage payments, council tax, food, childcare, utility bills, petrol, and so on. The resulting figure is your ‘disposable income’, i.e. the amount you can put towards your debts each month.
Whilst you’re doing this, why not take a moment to think about areas where you could cut back and free up more income to put towards your debts? For example, if you drink or smoke, now’s a good time to stop or cut down. Or you could reduce your shopping bill by swapping to budget brands for some food and household items.
- Prioritise your payments
Take a look at your debts and compare how much interest you’re paying to each creditor. The higher the rate, the higher the debt needs to be on your priority list. For example, if you’ve taken out any payday loans, you need to get these paid off as soon as possible to avoid having to pay extras fees and charges on top of sky-high interest rates.
When you’ve prioritised your debts, work out how much you can pay towards each of them every month, based on the disposable income figure you calculated in step 2. Try to pay at least the minimum payment off each debt if you can. (Don’t forget to double-check that you have enough money left over to cover vital payments such as the rent or mortgage, council tax and utilities, as noted in step 2).
- Look at 0% deals and/or debt consolidation
If you have enough disposable income to make payments of all your debts each month, then that’s great! However, whether or not this is the case, you could still save money by looking at ways to reduce your monthly debt payments.
For example, if you’re currently paying interest on credit cards, store cards or bank overdrafts, you may be able to move these to a 0% interest rate deal with a new or existing credit card provider. You’ll be charged a balance transfer fee and you’ll still need to make payments each month, but you could buy yourself some useful breathing space. Look on financial search engines such as moneysupermarket.com or comparethemarket.com for the latest deals.
Another option you could consider is a consolidation loan, where you move your existing card, overdraft and loan balances to a single provider. You’ll only need to make one monthly payment, which makes life simpler, and you could reduce your outgoings by paying a lower interest rate. Talk to your bank or building society in the first instance to see if they can help.
- Seek expert advice if you’re struggling
If, for any reason, you find you can’t afford to repay your debts, it’s time to seek help from a specialist debt advice firm like Bankruptcy Clinic. Our friendly advisers will talk through your finances in detail before explaining the options that are open to you for dealing with your debts.
This could be an informal Debt Management Plan or a legally-binding solution such as declaring bankruptcy, a Debt Relief Order or an Individual Voluntary Arrangement (IVA. If you live in Scotland, we can also give you access to other debt solutions such as Protected Trust Deeds and sequestration that are only available to Scottish residents.
Contact Bankruptcy Clinic today
The sooner you get in touch, the sooner we can help you take back control of your finances and overcome your debts. Simply complete our online form to request a call-back, call us free from a landline on 0808 168 7389, or ring 01625 462 770 from a mobile.