When it comes to writing off debt, it can be a slow and, at times, difficult process.
People often associate debt with poor money management, and addictive and expensive habits such as online shopping and gambling – but the truth is, it can happen to anyone. One singular missed payment can leave you in a small amount of debt, which is easy enough to do. The issue with this is, it can be a catalyst for other debts – and people find themselves in a downward spiral of owing money that they can’t particularly afford.
It’s nothing to be ashamed of, however, it is something that needs to be acknowledged and the quicker the better. If you’ve found yourself between a rock and a hard place with your finances, here are some top tips that’ll help you write off your debts.
Don’t Spend Money if You Can’t Afford to
Although larger arrears can be solved by, for example, selling your house to pay off debt, sometimes these more drastic measures don’t have to be taken. Of course, if you’re facing circumstances such as repossession, then this is a perfectly viable solution – but if your debts are slightly smaller, it is possible to gradually pay them off without having to lose your largest assets.
One of the first things you should be doing if you’re currently in debt is ensuring that you don’t put yourself in any more debt. Cut back on what you can – for example, if you’ve got a monthly gym membership that you pay and don’t use – get rid of it! The same goes for streaming services. Likewise, when it comes to the food shop, don’t buy what you don’t need. Sometimes saving money is completely down to clever and thoughtful spending – and the more you can save, the more debt you can afford to pay off.
Make Your Minimum Payments
When it comes to repaying your debts, it’s always possible to pay even just the minimum amount back monthly. Of course, the more you can pay the quicker you’ll clear your debts, however even just repaying the minimum amount regularly will ensure the improvement of your credit score, and is good in terms of proving your reliability as well as clearing even some of that debt. The most important thing is to make sure that your repayments go through on time.
The worst thing you could do is be late for your repayments, so ensure you’re always on time. As we said, even if it’s just the minimum repayment amount, it’s better on time and a small amount than nothing at all. You should always be doing something to repay the debt, however small.
Work Out the Maximum You Could Pay Monthly
Only paying what you can feasibly afford to pay goes without saying, but have you really taken a proper look at your incomings and outgoings, and figured out where you could boost your available finances?
Last of all, creating a budget is a great way of figuring out what the largest amount you could afford to repay monthly – and it’s easier than it sounds. People tend to be put off by the word “budget” but it simply means figuring out where you’re spending and could afford not to be – and how this could make your life easier, and in this case, pay off your debts more quickly.
All you need to do is sit down, and make a truthful list of your incomings and outgoings on a monthly basis. Then, have a look at the disposable income you have leftover at the end.
Now, the end goal is to reduce your outgoings and boost your incomings. Figure out how you could do this, by assessing what the most important points on the list are.
For example, if you buy lunch from work on a daily basis – then cut this out, and put the money in a “repayment jar” if you like. Do this for all of the things you deem as unnecessary spending, and then figure out how much you have left at the end of the month. Look at the disposable income once you’ve done this, and work out what the maximum repayment you could afford to make monthly would be. If you can make a habit of this, you will end up being surprised by how much more quickly you can pay your debt off. The last thing anyone wants is debt hanging over their heads like a dark cloud for longer than needs be.