Getting into debt happens to even the wealthiest amongst us, proving that however high your disposable income is, we are all prone to human misjudgements. However, as this is a common problem and most commonly recognised after the festive break, then instead of worrying about it or burying your head in the proverbial sand, then why not take two easy steps to sort it out and prevent it from happening again?
Deal with your debt: The most common way to run up debt over the festive period, is by using credit or store cards or by adding or extending an overdraft. Unfortunately these types of credit are generally the most expensive ways to borrow, often with annual interest rates (the APR) of more than 20%. In order to be able to reduce your debt from these sources, look at your overall financial picture and see if you have easily accessible money elsewhere that could pay of your debt. You could also secure a loan with a lower interest rate than the store/credit card/overdraft or other debt so you are able to pay off a monthly figure that you can afford.
If this isn’t an option for you, move your credit/store card balance(s) to another card with 0% balance transfers and set yourself an amount a month that you will rigidly stick to paying off the balance – and don’t forget to move your money again when the 0% period runs out, otherwise you’ll be back to paying very high interest rates on what’s left of the balance!
Take note of the different costs involved and weigh up your options, asking for help from a professional if you need to. Sometimes the cheapest way to solve a debt issue is to secure a loan rather than move your money from elsewhere incurring charges or forfeiting a better interest rate, for example.
If you are in more serious debt and it seems unmanageable then there are several not-for-profit, independent organisations that exist to support people in this situation and will negotiate with the organisations you owe money to – all whilst keeping your situation confidential so no-one in your family or circle of friends need find out your predicament. The charity Step Change is just one of these organisations. You can find out more by logging onto https://www.stepchange.org/ or calling its free helpline on 0800 138 1111.
Prevention is better than cure: To avoid having to dive into debt next time there’s a big expenditure – whether it’s Christmas next year or unexpected costs like an overdue holiday, costly home repairs or other pricey expenditure – ideally you need to make sure that your household has an adequate emergency fund. My advice would be to work on building up enough of a buffer to cover 3-6 months’ worth of expenditure and have it in an easily accessible savings account so you won’t be charged if you withdraw your money at short notice.
The important thing with debt is to recognise that it happens to a majority of people at some point in their lives, that there is nothing to be ashamed of and that you need to deal with the situation as soon as possible to avoid it having a lasting impact on your financial situation.