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The lockdowns themselves may seem like a lifetime ago.  Their effects, however, are not.  While lockdown benefited some people financially, it did a lot of damage to others.  It led to people running down any savings they had and then building up credit card and other debt.  If this sounds familiar, there are steps you can take to get your finances back on track.

Find out whether or not you are solvent

If you can make the minimum payments on your debts and still have enough to live on, you are solvent.  If you don’t then you are insolvent and there is no point in fighting it.  Being insolvent doesn’t have to mean that you go bankrupt.  Depending on your situation, an individual voluntary agreement (IVA) or a debt relief order (DRO) may be a better option.

Becoming insolvent can actually be a liberating experience.  It does, however, still carry long-term implications.  You should therefore always get professional advice before you apply for any form of insolvency.

Decide if you need time to breathe

If you’re not sure about insolvency but are sure you have problem debt, then you may benefit from a debt respite order.  These are commonly known as “debt breathing spaces”.  This name captures the general idea behind them.  They aim to give people time to step back, draw breath and work with a debt counsellor to determine a path forward.

That path may be insolvency but it doesn’t have to be.  Alternative options include a formal debt-management plan and simply learning to manage your debts more effectively.  Just keep in mind that any plan you create has to work over the long term so think carefully before you commit.

Tackle your debts strategically

Assuming you are solvent, you will need to tackle your debts.  Strategy can make this a lot easier.  Here are some points to help.

Start working on your credit rating

Make sure that you always make at least the minimum payment in full and on time if you possibly can.  If you can’t, then speak to your creditor(s) about it and work something out.  The better your credit score is, the better financial deals you’re likely to be offered.  Your credit score can also influence your job prospects and your ability to rent a house.

Maximise your income

There is a limit to how far you can cut your expenses.  Theoretically, there are limitless possibilities for growing your income.  Of course, in the real world, most people do have some kind of limitation on what they can do to grow their income.  The key point, however, is to keep looking for opportunities to get at least a little more than you have already.

This can seem like a huge task.  In fact, it can be a huge task.  Make it easier to manage by breaking it down into smaller ones. Commit to taking 15 minutes every other day to look for ways to grow your income.

Even better, use those 15 minutes to do something to grow your income.  For example, look for sites that hire freelance workers for microtasks.  Squeeze a few of these into your 15 minutes.  You will need to pay income tax and national insurance on your earnings but you will still have more money than you did.

Minimise your expenses

Minimising your expenses isn’t just about cutting back although that’s certainly often a part of it.  It’s also about getting the absolute maximum value every time you spend money.  Take 15 minutes every other day to look at one area of your life and see if there’s any way you could reduce how much you spend on it.

As a pointer, see if there are any skills you could learn (or improve on) that could save you money.  For example, if you’re not a confident cook, see if you can improve so you can cook more from scratch.

For debt help and advice, please get in touch.

Blackpool: 01253 299 399 | Carlisle: 01228 558 899