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The Reality of Family Debt and How To Manage Your Way Out

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The Reality of Family Debt and How To Manage Your Way Out home and family With the festive season behind us, many families all over the country are in a worse financial position than when they started.

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.

Photo via StockMonkeys.com

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The Reality of Family Debt and How To Manage Your Way Out home and family

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15 comments

  1. I think it always comes back to Budgeting & Tracking your spending.

    If you can succeed at these things then most of the time debt is factored in and you will end up making it work for you.
    Glen @ Monster Piggy Bank recently posted..How Much Does it Cost to Have a Baby?My Profile

  2. Good post! A lot of it does come down to budgeting, but that also includes having a plan for your money and where you want to be. The current economic climate does make it difficult, especially if you’re trying to get out of debt, which requires us to be a little more creative in looking for ways to save money and cut back.
    John S @ Frugal Rules recently posted..5 Easy Ways to Save Money Lost Due to the Payroll Tax IncreaseMy Profile

  3. It is very important to always compare prices, especially for utilities, it changes so often. I have an alert that will tell me if I can save more than $1 per week on my bill so I can switch.

  4. I think a lot of people out there have held gym memberships for years but now only go to the gym perhaps once a week. You may have to go to another gym to find one that allows pay as you go options but it could save you a decent amount over the year.
    Money Bulldog recently posted..Grab The Best Remortgage Rates While You Still Can!My Profile

  5. It’s all about the budget! Budget! Budget! Budget!

  6. I think you hit the nail on the head. People tend to get a little carried away with Christmas getting caught up in the holiday spirit. I’ve also heard that late January is also one the most depressing times of the year since it’s usually so grey outside ( at least for us northerners) and it also the time people start to get their credit card bills as well.

    The best remedy for this that I’ve found is to start a Christmas Fund. My wife and I save around $50 a month or better each month for Christmas this way when it rolls around again your more prepared for it.

  7. Budgeting has certainly helped my family. We’ve had those years when the December bills started piling up in January. Planning can make it much easier.
    Kim@Eyesonthedollar recently posted..Reformed Spenders Adjust to Life on a BudgetMy Profile

    • It has helped me as well, but I don’t do it much anymore because I got everything under control. I like to catch back up here and there, but I don’t budget regularly.

  8. Excellent tips. Budgeting and tracking spending has been crucial for us. It has to be a part of any truly successful plan, IMHO. I loved the part too about making sure to add in the ad-hoc expenses. Forgetting about those can quickly throw your budget off track and make for the risk of falling into spending too much again if you don’t have a plan for those occasional expenses.
    Laurie @ The Frugal Farmer recently posted..January 2013 Financial RecapMy Profile

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