You don’t have to feel alone if you’re worried about money, the last couple of years have put a strain on many people’s finances. Well-managed debt isn’t necessarily a bad thing, but feeling that you might have to fall behind on payments can be stressful.
Five ways to take control of your money
1. Pay off debts if you can
If you have any credit card debt on a promotional rate, be prepared for when this expires. You might find it more difficult in the current climate to get a new promotional rate, so overpaying now could save you some money when it returns.
Look at any existing agreements like loans or your mortgage, and see if it’s worthwhile overpaying. Always check with the lender to make sure there’s no penalty for doing this.
2. Talk to your lenders
If you’re struggling to repay debts whether it be your mortgage, overdraft, credit cards or personal loans, there is help available to you. You might be able to discuss options such as restructuring the debt to reduce monthly payments. Find out more here.
3. Check your credit report
Your credit report contains your financial behaviour from the last six years. When you apply for credit, lenders will use it to help decide whether to lend, and at what rate. Your credit score shows lenders how likely you are to repay your credit accounts. Generally the higher the score the better, and it usually means you’ve done a good job repaying in the past.
It’s a good idea to check your credit report to understand your credit score, and to make sure it’s correct.
4. Reduce outgoings
Make a list of your regular payments, such as energy, phone and broadband, TV subscriptions and credit cards. You could be in a position to switch to a better deal. If you find you’re still within a contract period, make a note in your diary of when it expires so you can then move to a better deal, penalty-free.
This is a good time to get a budget sorted. Budgeting apps connect electronically to your bank accounts to keep track of what you’re spending, and many of them are available for free. Mint and You Need A Budget (YNAB) are two popular budgeting apps.
5. Consider a debt management plan
To really understand what a Debt Management Plan (DMP) could mean to you, we need to talk ‘priority’ and ‘non-priority’ debts.
Priority debts include things like:
- Mortgage payment arrears
- Council tax bill arrears
- Gas and electric arrears
- Outstanding court fines
A Debt Management Plan is all about the ‘non-priority debts’ you have, so that’s mainly things like credit cards, loans and store cards. It’s an informal agreement between you and your creditors for paying back your debts, in a way that’s more manageable.
With a DMP, you’re asked to set up one monthly payment, and that’s then divided between your creditors. They’re usually managed by a DMP provider who deals with your creditors for you, so you won’t need to be in touch with them yourself.
If you’re worried about money, you’re not alone. There are many debt charities and companies that offer free independent advice for everyone. They can advise you, and could act on your behalf to help with any debts you might have.