Planning Your Way Out of Debt

The first step in getting out of debt is to plan how you are going to do it. Just like when you are planning to afford something, planning how to get out of debt needs to be well considered.

Unfortunately, to live in our society requires money. Bills are not a problem if you can comfortably pay them out of your income. By carefully planning your budget and not living somewhere you cannot afford, debt problems can often be avoided. Over-commitment is the most likely thing to plunge you into debt.

Too much debt

Getting overcommitted financially is unfortunately easy, especially in a day and age of many expensive consumer goods such as television and mobile phones. Services that require paying every month can quickly add up, especially when combined with bills, credit card debts, mortgage repayments and hire purchase repayments.

Changing circumstances

Changes in personal circumstances are the most likely reason for getting into debt. Changed circumstances may include losing your job, having an accident, divorcing from your wife or leaving your partner. A sudden drop in income means meeting your overheads becomes much harder.

Budgeting out of debt

Creating a personal budget means breaking things down and understanding exactly where you finances are committed. You need to look closely at what goes out of your account and what comes in. Reviewing your budget is never a bad idea. Once you have a clear idea about your budget it is possible to identify where you can spend and what you can afford.

Making your money work for you

Prioritising debt after making a budget is a matter of identifying what you can afford to pay and in what order. Making your money work for you is essential. Saving where possible, shopping around and not making unnecessary purchases all help to lower your commitment.

Am I over-committed and facing a debt problem?

Your budget should be able to tell you this, but if you have arrears, are using new loans to pay old ones, just scraping through your minimum credit card payments, and ignoring debts, it may be that you are facing a debt problem.