The Reality of Family Debt and How To Manage Your Way Out
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No matter how frugal you have been over Christmas, buying gifts and treats is an expensive business and if your bank balance was stretched beforehand, no doubt it is now at breaking point or beyond.
Families have had a tough time recently, especially with some of the changes to childcare benefits which have made it even more difficult for parents to work.
Unfortunately, 2013 doesn’t look as if it will bring any financial cheer and with more redundancies still on the cards and the next big change to tax credits due to take place, some families could find they are even worse off.
To avoid debts spiraling out of control, it is therefore more important than ever to have a firm grip of household finances and save money wherever possible.
Having a clear budget is the first step, one which many people skip. You might think you know exactly what you have coming in and going out, but taking a detailed look at your bank account transactions might provide a bit of a surprise.
Companies can slowly increase the amount they charge and with an incremental approach, it is easy to lose track of exactly how much you are paying. In addition, forgetting to cancel subscriptions or payments is a common mistake and many people can find they free up extra cash, simply by checking all the regular payments they have set up.
Once you’ve worked through your monthly expenditure, you need to add on ad-hoc expenses such as school uniforms, birthdays, car tax, MOT and Christmas. The best way to do this is to work out how much you spend per year and then divide it by 12 to get an average monthly sum.
This end figure will give you the real amount of expenditure you have every month.
Once you know how much you have to pay out, it’s time to work out if there is any way you can reduce the figure.
Look carefully at all of your payments – are you really going to use that gym membership? If yes, then of course keep it but if not, check whether there are any pay-as-you-go options. This will save you money in the long run but means you can still have a session in the gym if you feel the urge.
And what about your energy suppliers? When did you last do a comparison to see if you could get a better deal? Companies love to offer discounts to new customers and switching supplier is now ridiculously simple….and with rising energy prices, you could save yourself a significant amount of cash.
Energy firms are not the only ones who are competing for your custom, insurers are in the same bracket. And if you have more than one type of insurance – building, contents, car, appliance breakdown – you could negotiate a great deal by shopping around. Firms rely on the fact that once you have taken out a policy you will automatically renew, so save their best rates for new customers joining up. A free price comparison service from Baines & Ernst called Solve and Save could help you find out if you could save money on utility bills and insurances.
Dealing with debt
You should also look at how you are paying for your debts and looking at your budget to see if you have the funds available to increase repayments and clear your debts in a shorter amount of time. This will also help you to reduce the amount of interest which builds up on your debts.
If you’re struggling with repayments, you could consolidate debts into a lower monthly repayment with a Debt Management Plan or an IVA.
Both of these solutions are based on your personal circumstances and what you can afford to repay. All negotiations with lenders are taken care of on your behalf too – helping to reduce stress surrounding debts.
Managing debt isn’t easy but organizing your income and outgoings is an important part of staying on top of family finances and avoiding the misery of being behind with your payments. Prioritize your household budget in 2013 and learn how to save money on the essentials, so you don’t have to compromise on the things that you enjoy.
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