The prospect of paying off outstanding debts can seem insurmountable, especially when you owe large sums.
However, with the right approach it is possible to reduce what you owe and effectively manage your finances for a secure future.
We’ve laid out five simple ways for managing debt and getting your finances on track below.
Work out exactly what you owe
First off, you’ll need to work out just how much you owe. This way, you can get a clear picture of your situation and create a budget for it that works.
Create a spreadsheet containing the details of your monthly income and outgoings so you can clearly see what you owe and when a payment is due.
Include all your monthly outgoings, from mortgage and rental payments to daily coffees and gym membership. Consider whether you can apply for benefits or tax credits to boost your income, and check that you are paid the full income you are entitled to.
Once you have all your incoming payments and outgoings in place, you will be able to see how much money you have left after your living expenses, which can be used to tackle your debts. It will also highlight areas where you can cut spending to pay off your debt faster.
Switch utility suppliers
It helps to shop around for new energy suppliers on a regular basis. Many suppliers offer cheaper rates to new customers to get you to switch. Changing energy supplier could save you hundreds of pounds each year, freeing up additional income to pay off your debt sooner.
Even moving to monthly direct debit payments could save you money, as you’ll pay the same fixed price each month and could potentially save during winter.
Check comparison websites or talk to your current provider to find out where you could make savings.
Cut down on luxuries
Take a detailed look at your spending habits and work out what is essential and whether there are luxuries you might be able to cut.
Treats such as takeaway coffees may not seem expensive when purchased individually, but added up over a week, it could quickly eat into your income.
For example, buying lunch each day at a café or sandwich shop could cost around £5, which is £25 during the working week and adds up to £100 over a month. By making simple changes like taking a packed lunch, you could start making savings. For coffee connoisseurs, cutting down on the daily americano habit could save you around £300 a year[1]. Consider whether you could treat yourself to your favourite coffee just once a week, or try your hand at brewing your own at home.
Another great idea is buying individual ingredients in your weekly shop, which will work out cheaper than buying prepared food. Not only will it save you money, you’ll also be more likely to cut down on waste by getting more creative in the kitchen.
Leave the store cards at home
Store cards can be tempting if you want to buy a high-ticket item. They will help you get your hands on a new sofa or kitchen without having to pay everything upfront, but if you struggle to keep up with repayments the interest rate could increase, meaning you’ll end up paying well over the odds for your purchase over time.
If you think you cannot afford something in the long run, it is probably better to avoid the lure of store credit. You may still find similar products for cheaper by shopping around online.
Switch your mortgage
If you have lived in your house for some time and moved off your fixed rate onto a Standard Variable Rate (SVR), you could be missing out on cheaper rates and lower monthly payments if it’s time to remortgage.
Use a mortgage broker or comparison websites to find the top deals and discover whether you could cut your monthly repayments. Remember, you may still have to pay early repayment charges and potential legal fees, so it is important to take these costs into account when making comparisons.
Being in debt can be a stressful and worrisome time. Taking little steps towards freeing yourself of debt repayments can help get you on the way to a debt-free life.
Get more financial and debt advice from Norton Finance.
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