- Don’t ignore the problem
If you are having financial problems the worst thing you can do is ignore them. No matter how big or small the problems is, there is always a way out and there are many organisations out there who can provide you with free advice and support to help you get things back on track.
- Complete a budget
If you are struggling with money the first step is to complete a budget. This may sound obvious but when you put everything down on paper you will be able to see exactly how much money you have coming in and how much you are spending it. This will help you identify areas where you may be able to cut back and how much you have left at the end of the month to pay any debts with. There are some great budget templates available online which will help you identify all your income and expenditures
- Pay priority debts first
Not all debts are equal; some such as rent/mortgage, gas and electricity are more important and should be paid first. These are known as priority debts and not paying these can result in you losing your home, having essential services disconnected, bailiffs taking items from your home and potentially a prison sentence. Prioritising these can be hard as other creditors may shout louder, but priority debts should always be paid first.
The most common priority debts are
- Mortgage or rent arrears
- Secured loans arrears
- Council Tax arrears
- Gas and Electricity arrears
- Magistrates Court fines
- Child Maintenance
- Social fund loans and benefit or tax credit overpayments
- Income tax, National Insurance, VAT arrears
- Hire purchase or conditional sale
- TV licence
But don’t panic, whilst the sanctions for not paying these are serious you will be given plenty of warning which should give you time to take action.
- Get some free advice
There are lots of advice agencies who can give you free advice to help you with your money problems. Advice is available in a variety of formats such as face-to-face, over the phone or online. If you are in the UK we can refer you to StepChange who can provide you with free, impartial and confidential advice.
Beware of agencies which charge for their services. Many of these will take a percentage of the money that you pay back to creditors or charge an upfront fee which will means it will take you longer to pay off your debts.
- Take action
Once you have completed your budget and have been given advice on the best course of action, it is up to you to take action on the advice.