Debt Questions – How to cope with Debt?
Hello from the land of Debt. If you are asking ‘how can I cope with debt’ then you are not alone. If your debt situation is getting the better of you then you are also not alone. Back in 2012 when I originally started this blog, I was thinking the same thoughts and it wasn’t a great time. However once I stood back from the situation, understood exactly how bad things were and started working towards a solution things started looking better, but I would be lying if I said it was all magical and everything was great because it wasn’t.
I have put together a list of steps which I hope can help you start to regain some control. I think part of the problem, particularly in my case was the fact that I felt helpless. This was in part because although I knew I was in debt, I didn’t know how bad it was or how to move forward with it. I ignored it for a while which just made things worse.
Step 1 – Write down all of your debts
The first thing is to get a pen and paper and write down the name of every company/person you owe money to along with what you owe, or whichever way you prefer to make a list, do that. Now you can see how many companies you owe money to and if you add up all the balances, how much you owe.
The amount may shock you. You can’t change that now. All we can do is work towards solving the problem, because that’s what this is, a problem that needs solving, we got this.
An important note, are any of your debts priority debts? Read this article on the Citizens Advice Website to check. Also as a side note, the StepChange Debt Charity Website has a tool you can use that will go through all the things I talk about in this article. It is the same one I used to start solving my own debt problems.
Step 2 – What do you spend?
Ignore your debts for a moment and now let’s look at what you spend. For example, how much is your rent or mortgage? How much is your Water and Food shop? We need to write or record everything you spend either weekly, two-weekly or monthly to understand where our money is going.
Some things may need to give, for example if you buy a coffee every day then that’s out the window. If you subscribe to lots of streaming services then you should cut those back. Sometimes though, a lot of people barely get by and there is nothing to cut. That’s fine, life is tough at the moment.
Step 3 – What do you earn?
Add up how much you receive in income each week, two weeks or monthly. Now take away the amount you spend from step 2. Do you have anything left?
Yes
Go to step 4.
No
If you spend more than you earn and there is nothing to cut back on then I would recommend seeking help from Citizens Advice. They may be able to help you claim any benefits you are missing or help you with managing your money, they will also be able to advise on what to do about your debts too. Good luck.
Step 4 – Repaying Debt
Work out how much you should pay towards your debts each week, two weeks or month then add that to your spending in Step 2. Now take this figure away from what you earn. Are you left with a negative balance?
Yes
I would recommend seeking help from either StepChange Debt Charity or Citizens Advice. They will be able to advise you on which debt solutions may be appropriate for you and help you work towards solving your debt problems allowing you to take control again.
No
This means you can repay your debts and should continue to do so. You may want to have a read around my blog to see how I got through debt for inspiration. It’s not easy to get out of debt but you can do it. You should still consider talking to an organisation such as StepChange, especially if it is going to take you years to repay your debts.
Is the situation temporary?
If this is a temporary issue then you could try talking to the companies or people you owe money to and see if they can work with you to come to an arrangement. They may be able to offer a repayment holiday or agree to suspend interest and charges against your debts. One word of caution on this, you could damage your credit rating so ask about that when you make contact.
I hope this helps you work towards becoming debt free and taking back control again.
Further Reading: See my post on how I am solving my debt problems.