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Your debt management cheat sheet

Any debt that you are struggling to repay, that is keeping you awake at night, or that is affecting your relationships with other people, is one that needs to be tackled.Debts can mount up

Even so-called “good debt” – your mortgage, student loan, business investment loan – can turn bad if you can’t keep up the repayments or if it is taking its toll on your mental and physical health.

What are the warning signs that your debt has turned bad?

  • Making the minimum payment each month on your credit card
  • Using credit cards for essentials such as food shopping
  • Maxing out on your existing cards and your overdrafts
  • Juggling cards but never paying them off
  • Taking out a payday loan

Your debt cheat sheet

  1. Work out your total income each month including pay, benefits, and allowances
  2. Look through your bank statements and add up your regular monthly commitments – food, utility bills, mortgage or rent, council tax, travel
  3. Now add up your unsecured debt payments (credit cards and loans)
  4. Make a separate list of items that you regularly spend money on but are not essential – entertainment, gym membership, eating out, clothes, shoes and gadgets
  5. Work out where you could make savings and put together a spending plan which enables you to pay off chunks of your unsecured debt
  6. It’s best to tackle debts with the highest interest first, as these mount up the quickest and can potentially take the longest to pay off.
  7. Transfer debts with high interest rates onto a credit card with a 0% interest – but have a plan to pay this card off in monthly instalments so that the debt has gone by the end of the offer term.
  8. If you can’t do this, then pay off debts one by one, concentrating on increasing your monthly payments to reduce the interest you are paying on the outstanding sum.
  9. Make a note in your diary of when any deals or offers expire, so that you can plan in advance.
  10. When you are debt free start to put aside money in an instant access or regular savings account. As a rule of thumb, your emergency savings fund should be able to cover your regular outgoings for at least three months.

If you need help with debt advice there are a number of charities which offer free confidential help. They are:

StepChange

National Debtline

Citizens Advice