Sunday, 12 January 2014

Baby Steps To Managing Debt

I always feel a little more organised & motivated at the start of a new year, and it spurs me on to tackle things that I usually prefer to sweep under the carpet.

Things like debt.

Its something I don't like to talk about, or even think about if I'm honest, but believe me - it's there!

I don't think my personal debt problems are as bad as they could be, I know people who are in much worse debt than me - but it's still not perfect and certainly something I need to start improving if I'm ever going to start seriously thinking about buying a property.

At the moment Jon & I rent, and we're happy to continue doing that for the time being - we're not 100% settled where we are and I wouldn't be happy to commit long term to the area just yet, so renting suits us for now - but certainly within the next 5 - 10 years I'd like to have moved onto the property ladder if no for no other reason so that Tyne has something of value left to him in our wills!

The debts I have are all small amounts - all of them are under £500 each - but they are for silly things like final gas and electric bills I forgot to pay when I moved out of a property and then never got around to settling, a couple of credit card bills from when I was younger, a few missed catalogue payments - in total I'd estimate it to come to around £3,000.

Considering that the average debt per person in my area is £72, 462.94 according to Payplan's Debt Map I don't think that's too bad.
But it's an amount that I never have spare to just pay off - infact I don't ever have a few hundred spare to pay off one bill at a time either.

So instead I tend to ignore the reminder letters - I've become very good at ignoring them over the years - I recognise the pattern of debt management companies they're passed on to now! I see one letter head and think to myself "Oh those guys....they're not very good at chasing, it'll be xxx company next..." and sure enough a few weeks later, the next companies letter drops through the door.

But being so flippant about it is never going to help me to get anywhere financially and so with the start of the new year, I have stopped just throwing out the letters.

Just last week a letter dropped through the door, reminding me of £235 I owe to a gas company - Jon asked me if I wanted him to throw it out since that's what I usually do but I said no - I've hung it up on my fridge to deal with tomorrow morning.

The letter offers me the chance to pay 50% and have the rest written off, I can't afford to do that but I know that it's better to call them and discuss a payment plan I can manage than to just ignore it completely.

A friend of mine was recently talking about an idea which I thought was pretty interesting, whereby you start a saving jar and each week you put in a certain amount of money - you can set yourself whatever target you wish - such as putting in £1 for the first week, £2 for the second week and building up until you're putting in £52 for the final week of the year - by the end of the year, you will have saved over £1,000 - I thought it was a good idea!

Personally I use an ISA (as I know from previous experience that penny jars get raided - I have will power but Jon is the type to always dip in for a £1 here and there, and before you know it - its gone!) and I put aside any spare money I earn from blogging or my crafting business. 
I've been doing this for around 6 months now, and have managed to save a decent amount so I want to continue to do this.

There is also the option of consulting a debt advice agency, or even going to the CAB as they will usually help you to draw up a list of your debts and assist you with writing to companies in priority order and arranging payment schedules with them at a rate you can realistically afford. 

Little steps like these are what I plan on taking with all of my debts, and I hope that by the end of this year I will have fewer (if not no!) debt reminder letters coming through the door....and that way I will know my credit rating can begin to repair itself.

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