We only need to switch on the television and watch some daytime TV to understand how big debt management is in the UK. We have been steadily getting ourselves deeper in trouble as a nation since Tony Blair and Gordon Brown sold off our gold reserves and created a boom in the country; but a few short years later and we have no cushion of gold and our personal debt is at a worrying high. The explosion in popularity of debt management plans has helped many people recover their credit rating, but a lot of confusion still exists about the details of each plan. Essentially, all debt removal plans will, at some point need you to go through the following steps.
Collate your Debts
It’s hard to keep track of all your debts. That’s why some bills end up being paid late and others are not paid at all in some months. Before you enter into a debt management plan, you need to gather all the information you have concerning each and every one of your outstanding debts; so that you understand exactly what you owe and who you owe it to. You also need to write down everything you spend and this can be more difficult than totalling up your debts. It’s easy to clock up an extra few hundred over the space of the month on items and luxuries that are not necessary and it’s only when you check through your statements that you realise how much you are haemorrhaging money.
Calculate your Income
For most of us, this bit is easy because we are on a fixed wage when we are salaries, but it can get complicated if you are self-employed or you have a lot of overtime each month. Always use your income based on your contracted hours and don’t add any overtime even if you have consistently worked extra hours for a long time. If the worst happens and you are only able to earn your basic wage then you will have budgeted properly by not assuming overtime will be available.
If you are self-employed, it’s time to be realistic about your future prospects. It can be hard to guestimate accurately, but you can take the last twelve months earnings from your accounts and divide them by twelve to give you a rough idea of your monthly wage. It’s important to be clear about payment frequency when you come to negotiate with creditors.
Calculate the Difference
Now that you have all your bills and your income laid out in front of you, it’s time to crunch the numbers. You should have included any weekly food spends as well as any other living expenses in your outgoings in stage one. Now it’s simply a matter of adding together all your contractual minimum monthly payments and seeing what you have left when you take the total away from your income. If you have been struggling with debt for a long time, there’s a good possibility you will have a negative number here, but anything positive is a real bonus.
Dealing with Reality
Finding out you are in deep financial trouble is a sobering feeling that empties your stomach and can have a massively detrimental effect on your ability to function. It’s important to stay focussed at this point and the last thing you should do is bury your head in the sand and try to forget about money problems. It’s often that kind of reaction that led to your financial problems in the first place.
If you don’t know where to turn, the Citizens Advice Bureau is a good place to start, but as they are often staffed by local volunteers, you may feel better speaking to a professional with specific knowledge of how to handle your situation in the best possible way. It can be tempting to accept the help of the first person you speak to, but it’s vitally important you consider your options. You need to be careful because although the debt management industry is mainly populated with ethical people, there are some organisations that have tarnished the reputations of legitimate businesses.
Acting is Important
The most important thing you can do is act on the information you have in front of you. Too many people avoid facing up and speaking to people about their situation because they are embarrassed. Uncontrollable debt nothing to be proud of, but there are enough people suffering to you’re your problem an everyday experience for anyone that is able to offer help.