The increase in consumer debt over the past few years, mainly since the recession is staggering. More and more people are finding themselves in a situation where they are battling to cope with their rising debt, with some feeling as though it’s a mountain they just cannot get to the top of, no matter how hard they try which as a result has led to more people within the UK having to use an IVA (Individual Voluntary Arrangement) or Trust Deed to help manage their debts.
Saving monthly, paying the minimum repayment on credit cards and cutting back on things such as travel or eating out – following the guidelines which are published in many magazines and blogs. Feeling like you’re doing the right thing but it just doesn’t seem to be making a difference.
This is why many people are turning to IVAs and Trust Deeds. These can help those individuals and families who are struggling with mounting debt to cope. In the case of an IVA or individual voluntary agreement, creditors will come to an agreement in which the consumer pays all or some of their debts over a period of time.
It’s favourable to bankruptcy as it allows more control over assets. A Trust Deed is also an arrangement where all of a debtor’s assets are transferred to a trustee to manage and pay back the creditors. This will also include paying a regular portion of their income to the trustee to allocate to creditors.
Before choosing to enter into either of these agreements however, try to reduce debt yourself. It IS possible.
Below is the ULTIMATE list of budgeting tips to reduce debt, and following as many of these as possible, will help you to get a lot closer to the top of the proverbial mountain than you have ever been…
Spend less than you earn
This may seem obvious, but many people rely on credit cards to live a lifestyle that costs more than what they earn. Create a realistic budget and stick to it.
Cut up your credit cards
Do this so that you are not tempted to go over your monthly budget.
Pay off credit cards with the highest interest first
Check APR on each card and pay them off from the highest to the lowest.
Implement a weekly meal plan
By planning your meals for both lunches (at work, school or home) and dinners, you will know exactly what to buy. Anything that doesn’t got into one of the recipes, doesn’t need to go into the trolley.
Take your lunch to work
Taking your lunch with you to work can save a substantial amount over time. The same applies to morning coffees.
Look to change your home and car insurances
Insurance companies usually rely on the fact that people will not cancel the automatic renewal each year, but often their prices don’t remain competitive. Use a price comparison website and don’t be afraid to change insurer.
Don’t buy new clothes
There will be times where kids grow out of their clothes and buying new clothing is unavoidable, but the adults most certainly don’t need anything new until after the debt has been paid off.
Downgrade your mobile phone and TV package
It’s an essential part of reducing debt, whether we like it or not. We don’t need the mobile phone package with unlimited minutes or huge amount of data, nor do we need the best TV package with access to the latest box sets. While you are paying off debt, downgrade to the basics.
Track your expenses
Writing down everything you spend or using an app to track can help you to spend less because you are constantly aware of the running total. Put a stop to any monthly subscriptions such as Netflix and Audible. All the small amounts do add up over time.
Put any extra cash towards your debt
Any additional money from overtime or part-time work as well as unexpected cash in the form of a gift or someone paying for you when you had planned to pay yourself, should immediately go to pay off your debts.
Cut back on entertainment
This will only be a temporary measure but will go a long way to decreasing your debts.
Pay a little more than the minimum repayment
Even if it is only £5 extra, always pay something more than the minimum which will bring down the interest you will pay over the course of the debt.
Try implementing just one of each of the above tips per week and within three months you will have built up numerous healthy habits towards reducing your debt.
Adriana @Money Journey says
I love these tips! When we were in deep debt, we learned to follow most of the advice above and boy did that help!
Thing is, even after becoming debt free, we still follow some of the “money rules” we had back then.
We got used to not buying new clothes that often, I took my lunch to work every single day at my old job, we switched to a cheaper car insurance to save money (and I still shop around from time to time, if I find an even better deal we’ll switch again).
Whether you’re in debt or not, it never hurts to follow good money habits on a regular basis 🙂