Arguably, there’s never a bad time to tackle debt. If, however, there was ever a good time to get to grips with your borrowing, it’s right now. With the economic effects of the Coronavirus likely to be felt for a long time to come and Brexit on the way, it’s more important than ever that UK borrowers get a grip on any debt they owe. Here are some tips.
Really track your expenses
When your finances are coasting along, it may be convenient just to check your bank statements to get a general idea of where your money is going. When money is tight, however, or you’re trying to make a push on clearing personal debt (or both), then you need to know literally where every penny is going. That means keeping receipts and if you don’t get a receipt, keep a note of the purchase.
This may seem tedious but it’s the only way to be sure that you really understand your finances. What’s more, if you need to negotiate with your creditors, you will have evidence that you’re doing everything you can to manage your money. In the worst case, if you need to go insolvent, you’ll be able to set a realistic budget with the official receiver.
Consider increasing your insurance cover
If you’d describe your situation as “tight” rather than “desperate”, then now could be a very good time to review your insurance cover. Basically, the idea is to make sure that you have small, predictable expenses you can manage rather than take the risk of having to deal with unpredictable larger expenses. In simple terms, the more important something is to your life, the more you should think about protecting it with insurance at any time, especially when money is tight.
Think very carefully about long-term contracts
If you know, for sure, that you will need a product or service over the long term, then signing up for a long-term contract might be the most economical way to get it. If you don’t, or if it’s a want rather than a need, then it might be worth paying a bit extra for a short-term contract so you know you can exit it easily if need be.
See if you can increase your available funds
Your first thought might be that this is impossible right now and you might be right. On the other hand, you might be wrong and you’re only going to know if you check. Selling unwanted stuff might not make much, but it could still make you something. Finding a new source of income could make you even more, just remember to consider the tax implications.
Check your credit record
Your credit record isn’t just used to decide whether or not you get credit (and if so at what price), it can be used to determine whether or not you get other kinds of contracts (like mobile phone contracts). It can also be checked by landlords and some employers. In short, it’s important even at the best of times and it becomes particularly important when money is tight and you want access to the most competitive deals you can find.
Decide if you can afford your current home over the long term
This is particularly important for homeowners but also applies to renters. If you have doubts over your ability to meet your mortgage/rent obligations over the long term, then it may be best for you to grit your teeth and move house on your own terms, rather than wait for foreclosure/eviction. If you’re a renter and still have an extended period on your lease, you may want to discuss your situation with your landlord. It’s also in their best interests to have a tenant who can afford their property.
For information or advice, please contact us.