Once Christmas and New Year is over, it is now time to face some facts. If you have gone over your overdraft, you are in debt and if you have reached your overdraft limit, you are on the verge of debt problem. Besides, all your credit card bills are going to haunt you now. But there are several things that you can do about such problems and stay debt free in 2018. Below you can find some of the steps that you can take to pay off your debt and avoid them in future.
Know Your Debts
To avoid debt, first you need to deal with your previous debt. Thus, it is important to first identify all your debts, including your overdraft as well. Also find out the amount of money you are paying in interest or fees on each debt. Knowing how much you owe will help you to priorities how much you need to pay off. You can also take a quick look at your credit report.
Reconsider Your Spending
When you plan to sort out your debts, you will also have to focus on your spending habits. The plan should be to spend less and pay more towards your debt. If you are big spender, you should try to figure out what are you spending the cash on and if you are spending more than what your monthly income is.
Create A Budget
Once you receive your bank and credit card statement, go through it carefully and try to identify what you could cut down on. Once you know how much you are spending for which category, you can start reorganizing your spending habits. Managing your spending will help you to cut your shopping bill.
Priority And Non-Priority Debts
Not all debts are same. Some can be more dangerous than other debts. For instance, if you fail to pay your mortgage, you could end up losing your home or if you do not pay council tax you are likely to end up in jail. But when you do not pay off your store card debts, you will simply lose money or some possessions. So, you can categories your priority and non-priority debts and pay for the important ones first.
Speak To The Lenders
If you trying to get rid of your debts fast then you should try to speak to the lender. Specking with the lenders can be more helpful when you are having any difficulty in making repayment. You can try to come to an agreement that will help you repay your debt, such as extending the loan term. Besides, it will never hurt to ask the lender to lower the interest rate.
Consider Moving Your Money
You can move all your money to a 0% card. However, by doing so you cannot assure if you will get the best deal. But by switching you can always reduce the interest rate or even no interest for a period of time. You can also take out a personal loan at a lower rate instead of cards and use it to clear your more expensive debts. But you should ensure you do not build up more debts on your card or overdraft and save money.
Choose A Debt Management Plan
At times you may have to take outside help to become debt free. So, lessen your stress by signing up to a debt management plan and pay a set amount every month. But you need to be careful when you sign up for such plan. Compare the offered plans and choose one that you trust.
Build Up A Healthy Financial Safety Net
Once you are back on track, continue working to build a strong financial cushion. This will make it easy for you to deal with the financial emergency that you get caught out again. You can start by saving for emergency, finding a better paid job, getting a second job and so on.