Debt doesn’t have to be scary.  There is plenty of help out there.  The main thing is to acknowledge how much debt you’re in, work out a plan, get some help if necessary and then do something about it. The inspiration for this post comes from a recent press release i read by Debt Free Direct – a UK debt help company.

Many people tried to hide their debt from their partners or even themselves, pretending they don’t have a problem.  Hiding bills and debt is not the answer.  It is important to acknowledge the problem and then try to deal with it.

First of all, add up everything you owe, then workout how much you can afford each month, taking into account all the normal outgoing like bills, mortgage, etc.  See if there’s anything you could cut down on – perhaps taking sandwiches to work, instead of buying lunch.  Then start with the largest debt first and pay as much as you can afford into that – this is called “snowballing”. 

Pay off the minimum on the other debts until you have rid yourself of the largest ones.  Then you can gradually chip away at the smaller ones.  Remember the larger the bill, the more interest you have to pay – so it’s important to reduce those large bills as soon as possible.

If your debts are out of control, then there is plenty of help available and it’s free.  The Citizens Advice Bureau is a good place to start.  They will advise you and put you in touch with other agencies if necessary.  Don’t be afraid or ashamed – they have plenty of experience in dealing with debt. 

Once out of debt, treat credit cards very carefully – ok you might need to pay for hotels and holidays.  But always think of a credit card as a “debt” card and act accordingly.  Never ever use a credit card for cash, even just to tide you over for a short time.  The interest rate on cash withdrawals is much higher.  Avoid at all costs.

Paul and Mary were doing very well in life. Mary was a teacher and Paul was an engineer. They had three children all at school. Paul was offered a new job a long way from home, but as it was offering a substantial increase in salary along with a company car, Paul and Mary decided that he should accept the offer and they would relocate. As Mary was a teacher, it would be easy for her to find a job wherever they lived.

Paul took the job, but it was sometime before they could sell their house as the housing market was very bad. He lived in lodgings in the meantime which was quite stressful but at first but they got used to it. Eventually after a year they sold their house and took advantage of Paul’s increased salary to purchase a much better house than their previous one. The area they moved to was much more expensive, so they took out the maximum mortgage they could.

Making the repayments was harder than they thought, but the struggle was worth it; an investment in their future. Mary got pregnant and when the new baby was born decided to temporarily leave teaching to look after her. This put a greater burden on their finances but they thought they could cope.

Paul’s income was not enough to cover outgoings and soon debts were spiralling upwards. Paul kept this secret from Mary. He survived by juggling with credit cards and eventually was making cash withdrawals from cards to pay into his bank account to cover mortgage payments.

This was not sustainable, and eventually, once the phone calls from debt collectors started, he broke down and explained their situation to Mary. At first she was angry but she was a very methodical person. She looked at all the money they owed along with their income and realised that something must be done quickly and that proper debt management was called for. Having made that decision they talked to a debt management organisation that put in place a plan to manage their debt. They are now much more careful and soon their debts will be behind them.