Life and Career Skills

I have so many friends and family who are in debt, but continue to live life like there is no tomorrow. I know it is hard to recognise if you have a debt problem. Once you have, it can feel like the end of the world and panic measures set in so it's beneficial to spot the signs early on. Life will be different for a while. For example, can you only afford to make minimum payments on your credit or store card repayments? Do you regularly struggle to pay for your basic living costs (eg rent, mortgage, property taxes, utilities)? Does your list of income and expenditure shows that you have more going out than coming in?

If you recognise these signs, the obvious starting point is can you increase your income or reduce your spending?

On the income side, check that you are claiming your full entitlement to social security benefits and tax credits and that your tax code is correct. Also, consider whether you can increase your income through working additional hours or taking a part time job. Have a look in your attic and cupboards, you may be surprised with what's there giving you the opportunity to sell unwanted items for extra cash. many people have made a lucrative living from eBay.

On the expenditure side, look to see how to save on your mortgage, insurance, and utility costs by visiting some comparison sites on the internet. Similarly think carefully if you can you reduce your regular spending in areas such as housekeeping, clothing, and other personal spending. Question if they are all necessary. If you are paying your mortgage monthly....change immediately to at least a bi weekly payment. This small change will save you many thousands of Dollars.

After recognising that you do have a debt problem, one solution could be debt consolidation. This involves borrowing more money to repay existing debts with the payments on the new loan being less than you currently pay on your existing debts.

If you fully understand the implications of what you are doing and are able to access new borrowing at a low rate of interest, debt consolidation can be an effective approach to a debt problem. Alongside this you need to aim to bring your budget back under control, pay back any future credit card spending in full each month without fail and start saving for future unexpected or irregular costs.

However, be very careful, consolidating often lead to worsening debt and sometimes even potential homelessness. The reduction in monthly payments often comes at a heavy price. Paying back your debt through a new loan over a longer period may sound good but because of a reduced monthly payment, seeing how much you will have to pay back in total could be much more than you expected. Also, if you are a homeowner your consolidation loan is often secured against your house which means if you fall behind on your loan payments you risk losing your home!

Debt consolidation is a growing sector and companies vary significantly in their approach, so make sure that you do your homework and are dealing with a reputable organisation that explain all of the options open to you.

Finally, consider using some simple personal finance software that will keep the position with your personal finances up to date and should highlight debt issues early. The earlier the problem is identified the easier it will be to control.

It is never too late to recognize that you may be in financial difficulties or overwhelming debt. Speak to your bank to see how they can help. There is no time to ignore the problem or wait to win the lottery. Take action NOW!

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