ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel
  • »
  • Personal Finance»
  • Debt & Bankruptcy

Getting Out of Debt Tips

Updated on June 8, 2010

If your outgoings are currently far exceeding your income, you need to work out the best way to work through your financial problems to get yourself out of debt.This is often easier said than done, but there are some key areas that it pays to look at and work through to make the debt-busting process easier.

Work out your debts

Firstly, sit down and list every single one of your debts. It will more than likely be a massive shock to see just how much you actually owe to your various creditors in black and white, but you need to do this step to be able to create an effective debt management plan. As well as detailing how much you owe, make a note of who you actually owe the money to. This will make things easier when you come to tackle your debt repayments.

Draw up a financial statement

Once your list of debts has been committed to paper, it is a good idea to create a financial statement detailing all of your income and outgoings. This includes essential payments such as rent or mortgage payments, utility bills and food costs, but you should also factor in the minimum payments on your credit card bills or loans as these also count as outgoings. On top of this, include all of the non-essential outgoings that you have. For example, you may be currently paying for television subscriptions, gym memberships or meals out every so often. Be completely honest with yourself when drawing up your budget and do not miss out a single thing as even the seemingly insignificant purchases add up over time. Once you know exactly how much money is available for throwing at your debts each month, you can begin to work out how much to allocate to each one. If you have been living significantly beyond your means, you may find that there is no excess money left after paying for your essential outgoings. This is the worst case scenario, but there are ways to get out of the mess.

Cut back on unnecessary spending

After you listed all of your outgoings, you will probably have found that not all of them were strictly necessary and that you can live without some of them (such as the gym membership or cable subscriptions). If this is the case, now is the time to get rid of them as you cannot afford such luxuries if you are already struggling to make ends meet and have debts to tackle. If you have cut out all of your unnecessary spending, there are probably still areas that you can make cutbacks if you look hard enough and are clever. Try shopping around to see if you can get your electricity or water at cheaper rates and use price comparison websites when making online purchases to ensure that you are getting the best deals.

Contacting your creditors

You will need to contact your creditors to negotiate your debt repayments. Send a written letter to each of your creditors explaining your financial situation, and enclose your financial statement. This should make your situation immediately obvious to creditors and makes it more likely that they will meet you halfway. Offer 'token' payments to creditors with the money that is left after expenses have been met. These will more than likely only be small contributions, but they can show your creditors that you are serious about repaying your debts. Creditors will often try to pressure you into paying more than you can afford, so it is vital to stand your ground and only offer realistic amounts.

Long term options

Making 'token' payments will barely make a dent in your debts in the long term, so you will need to have other options in place to get out of debt. This may involve using a loan to pay off all of your debts, and then making repayments on the loan. This will stop you having to pay interest on multiple debts, but it is worth bearing in mind that the interest on loans can be high. Alternatively, a debt management company can consolidate your debts and pay creditors on your behalf. However, they will often charge significant fees for doing this. As a last resort, you can declare yourself bankrupt to write off your debts but this will have a big impact on your credit score.


    0 of 8192 characters used
    Post Comment

    • Hello, hello, profile image

      Hello, hello, 8 years ago from London, UK

      Thank you for your great help