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Managing Your Debts

For most of us, debt is just one of those things that we will have to deal with at one time or another, but successfully managing your debts is a totally different story.

If you don’t keep on top of your debt repayments then it’s very easy to lose track of how much debt you actually have – not knowing who you owe money too is a very scary thought.

To successfully manage your debts you need to first monitor your expenses. Probably the most important personal finance rule is never spend more than you earn, but if you don’t monitor your expenses then you won’t know how much you actually spend.

To collate all of your expenses together I would collect all the bills you have from the previous month and all of your bank statements. Split up all of your expenses into regular and irregular, e.g. regular payments could include your phone bill or credit card statement, where as irregular could be clothes shopping.

More often than not your regular payments will be the payments that you have to make, but with your irregular payments you should have some room to cut down to give you some breathing space.

Once you know how much money you pay back on a regular basis it’s time to work out how much you owe in total. I know this can be a daunting prospect but it’s vital to get it done as soon as you can. If you don’t have this information at home, then give your creditors (the people you owe money to) a quick telephone call to find out, once you know the total figure you have to pay back then you then have something to aim towards.

Now you know your debt figure, you should list your debts in order of priority, which debts do you think you should pay off first and why? The debts you should aim to pay off first are the ones with high levels of interest as these will be the most damaging to you financially.

If you feel like your level of debt is too high then try to think of ways that you can make it easier to manage. Do you have any savings that you could use? For example in a cash ISA or an equivalent account. Could you consolidate your credit card debts using a balance transfer credit card? Think of ways to give you more time to make your repayments.

To try and make a dent in your overall debt figure, set yourself some short term and long term debt goals. Having financial objectives help to keep you motivated and focused. When you set your financial objectives it’s important to be realistic and also set yourself a time limit, you’ll then have something to aim towards and it will keep you motivated.

It’s important to remember to always monitor your progress, if you’re doing well then great, if not then try to see why and work on rectifying the problem.

When managing and dealing directly with debt it’s important not to give in, some people think that making small progress doesn’t really have an impact but it definitely does, so remain focused and you will get there in the end.