Financial Tips for When Things Get Tough

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AD | The lead up to the festive season can lead to a lot of financial strain for people. But what can you do when things get too real? When you’re looking at the figures and nothing seems it will help? Here are my top three financial tips for when things get tough.

Whether living life as a student, with a job or living loan to loan, or as a fully-fledged adult holding down a job, money worries are a genuine concern for a lot of the population. It’s no surprise then that, as of July 2021, the average credit card debt per UK household was £2030.00, while the average total debt per UK household exceeded £62,000 [stats from The Money Charity]. And with Christmas looking to be on track for this year, it’s hardly surprising that this figure is expected to rise as the general cost of living increases.

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It was announced yesterday that the National Living Wage is set to be increased in April 2022, with the rate for those over 23 rising to £9.50 per hour from £8.91. However, this extra 59p per hour does little to soften the blow of rising food, energy, gas and oil prices, never mind clothing and other items involving basic raw materials. While the Coronavirus can be held accountable for a large amount of this, the ever-present whisper of “Brexit” can be heard on the lips of those of us in Northern Ireland as more shops announce further items they can’t chip to us.

But I digress. Looking back to the start of 2021, we discussed how you can set a budget for the year ahead. I’ve also discussed my essential tips for budgeting for Christmas. However what can you do when things get financially tough? And how can you tell the difference between “some money issues” and “time to panic”? 305 people a day were declared insolvent or bankrupt in England and Wales between June and August of this year. This works out at approximately 1 person ever 4 minutes and 43 seconds. Throughout the month of August, Northern Ireland saw an average of 4.8 insolvencies a day, while Scotland witnessed 20.7 on average. And these numbers are allegedly on the decline.

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However, there is hope. These are the three financial tips I received when things got rough. And now, 4 years later, I am almost at the end of the tunnel. You can be too, with a little help and support from the right people. If you’re going into debt, get advice on how to prioritise your debts. When people feel anxious, they sometimes avoid talking to others. Some people can lose their confidence about driving or travelling. If this starts to happen, facing these situations will generally make them easier. Personally, I talked to friends, and set about rectifying my finances using their advice. While this worked for me, please remember each person and case is different. If you are looking for information on choosing a qualified financial adviser, how much advice will cost, a checklist of things to think about before seeing an adviser and how to make a complaint, then you should check out Citizens Advice here.

Financial Tip 1

Sit down and assess how serious your situation is. As we mentioned briefly above, if you’re having “some money issues” as opposed to feeling it’s time to panic, then you’ve started at the right time. To use a more professional term, you need to assess if you are in debt crisis or if you just have worrying or large debts. The definition of debt crisis depends on who you ask, but a good indication that you might be in one is if you answer yes to either of these two questions:

1. Are you struggling to pay all basic outgoings, eg, mortgage, rent, energy bills and credit card minimums?

2. Are your debts (excluding your mortgage) bigger than a year’s after-tax income?

Even if your debts are big, if you can service them, even at the minimum level, you’re NOT in debt crisis and a different solution applies. Even for those in crisis, the nuclear option – bankruptcy – is rare. Even then, there’s always hope. If you’re in crisis, the fact you’re reading about it and looking for help is a great start. Many people simply close their eyes to reality, which is the worst thing to do. Now you know there’s a problem, it may feel worse than before. But the fact you’re about to sort it out means in reality, you’re better off.

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Tip 2: A Tip of Two Parts

The first step is completed – you have assessed your debts. Step 2 now sees us divide down into two parts. Sort your spending, and cut the cost of your current debt.

Financial Tip 2a – Sort Your Spending

Figure out a budget and reduce your outgoings. Put simply, you cannot get on top of your debt if you continue to spend as if nothing is wrong. There are many sites offering free budgeting tips and advice, however I personally went straight to the Money Saving Expert site and used their Money Makeover Guide. There’s advice on getting help with your mortgage, reclaiming charges, and even help with finding out if you’re eligible for benefits in order to help you out.

Tip 2b – Cut the Cost of Current Debt

With a simple goal of repaying debt as quickly as possible, all while being charged the lowest possible interest rate, we next look at cutting the cost of your current debt. Check your credit score through a free site and then set to shifting debts to a cheaper credit card. Please note, some companies allow you to move other debts to them at special rates. Doing this in the correct order can create substantial savings. I went down the lines of a 0% balance transfer card, and have almost cleared all the credit card debt I had built up over 2 years.

People who would prefer to deal with one monthly payment and one monthly interest rate, may decide to consolidate all their smaller debts into one large repayment. This is normally done via a Debt Consolidation Loan. If you are considering debt consolidation, you’ll need to budget enough to cover all your monthly household costs and work out how much you can reasonably afford to pay each month. Learn more about Debt Consolidation here if you think this is a viable option for your financial situation.

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Financial Tip 3: Seek Help

As I previously said, these are just the steps that worked for me. For those in debt crisis who are consistently struggling with debts and meeting repayments – a sad consequence of coronavirus for some – free personal help is invaluable. If you can’t afford to pay off your debts, you might be eligible to apply for a Debt Relief Order. For more advice on debt management, check out debtconsolidation.com today. Don’t wait for the festive season to worsen your financial situation.

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