 |
|
Debt is simply the money you owe. Put simply debt is money you have spent which you do not have.
Getting into debt is very easy especially in this country. You get letters in the mail pre- approving you for credit card, your bank offers you credit card & overdraft, your shop, supermarket offers you credit, there are buy now pay later,1 year interest free credit offers all over the place.
How do people get into debt?
1. Redundancy loss of overtime
2. lower income due to divorce or separation
3. financial difficulties due to ill health – medical emergencies
4. Death / bereavement
5. Spending as a feel good theraphy
6. Pregnancy
7.wishful thinking & ignorance
8. keeping up with the jones – spend money u don’t have
Effects of Debt
1. stress & anxiety – 40% of people with debt being treated for depression
2. feelings of hopelessness & depression, Panic attacks
3. Low self esteem, feelings of failure
4. strained family relationships – 60% of divorces has finances as the root cause
5. lack of trust between family members
6. negative feelings of guilt, anger & resentment
7. exhaustion from overwork – 2-3 jobs, overtime
8. thoughts of suicide leading to suicide attempts
Losing financial Control
• Not sure if the cash machine will pay or not
• No idea of the balance of a bank statement
• Always overdrawn
• Stopped opening bank statements or letters
• Panic or break in sweat when you see a bill on the doormat
• Losing track of direct debits operating on your account
• Impulse buying
• Minimum payment on credit cards every month
• Leaving payment of bills till last minute
• Avoid talking about money & lie awake at night worrying
• Your money goes purely on meeting interest payments only
GET OUT OF DEBT FAST Get the strategy for Financial Freedom in 12mths |
Steps to debtfree living
Summarize & Prioritize your debts
1. Know where you are – statement of affairs – list debt on sheet of paper with 3 columns for the name of the lender-balance- interest rate
2. Have a written plan- a budget - separate NEEDS – WANTS – DESIRES
With an income & expenditure statement. Showing all income and expenditure to get your monthly disposable income
3. Prioritise – PAY THEM FIRST
t- tax ie council tax
h- hire purchase
e- electricity
m- maintenance child support
f- fines-
i- income tax
r- rent/mortgage
s- second mortgage
t- tv license ( water, credit card, personal loans not priority debts)
4 Negotiate
If you've got creditors bothering you constantly, you probably feel that you have no leverage at all. But in fact, you may be able to get your credit card company to reduce your interest rate, even if your credit isn't perfect.
There are two good ways to cut your rate. The first is the straightforward approach: Call your card issuer, and ask for a lower interest rate.
The other way to get a better rate is through balance transfers and other introductory offers. If you play your cards right with those offers, you can move credit card debt from one low-rate card to another for months or even years. But be aware -- many banks charge one-time balance transfer fees of up to 3% of the amount transferred.
5. Snowball
Now it's time to start paying off that debt. After you make all your minimum payments, take whatever's left and apply it to your highest-priority debt. In most cases, that'll be the credit card with the highest interest rate.
This is called snowballing, because as you pay down your debt slowly, month after month, your progress will get faster and faster. Every extra dollar you pay means less in finance charges, letting you put that additional savings toward debt reduction. When that first card is paid off, it's one less minimum payment you have to make, so you'll be able to pay off your second card faster
Debt solutions - choose the one that suits you
At times it may seem like you are stuck up with debt and there is no way to get out of it. That the bills will keep stacking up and the debt will continue to climb. But there is a way out. We have listed 5 different ways of solving debt related problems:
1. Debt Consolidation: It lowers your interest rate and waives off your late charge fees by combining your debts into a single payment.
2. Debt settlement/IVA –Individual Voluntary arrangement : In this process, only a part of total debt is paid to the creditor. A deal is settled with the creditor for a lump sum amount (which is collected under a trust account by the law firms/debt settlement companies).
3. Bankruptcy: Bankruptcy as a debt solution is considered as the last resort as its outcome is long lasting as well as far reaching. Up to 100% written off
Lose most assets, best for severe cases, not confidential.Bankruptcy – is discharged after 1yr if bankrupt after 1st april 2004. It costs about £380. there are dischargeable & non dischargeable debts
4. Self Repayment plan: You can pay off your debts on your own by developing a repayment plan on your own. A successful implementation of the plan would require:
o Self discipline and self restraint
o Knowledge of different debt reduction techniques
o A feasible budget that includes funds for emergencies and sudden expenses
5. Ostrich method: It says, "Ignore debt for long and it will vanish". This is not recommended and is not applicable for everyone, just a small group of people. Since this is not applicable for most of us we are not describing it here.
Debt Negotiation Tips
• Calculate disposable income from statement of affairs
• Divide disposable income between creditors
• Communicate in writing and offer them a percentage of your disposable income and a cheque as 1st instalment even if its £1. Attach your statement of monthly income & expenditure to proof your situation
• Get repayment agreement in writing – create a paper trail
• Don’t bluff – if you make an offer be sure you can keep your word
• Contact creditors in advance if you get into trouble
• Protect yourself – if you get a court or official paper Don’t ignore
• Be realistic and fair with your offer
• Never give up
GET OUT OF DEBT FAST Get the strategy for Financial Freedom in 12mths |
Other Resources & Further Help - www.GetOutOfDebtWorkbook.com
Several debt mgt companies advertise their services in negotiating repayment with creditors & charge 15-25% of the debt. Don’t pay for advice when many organisations offer services for free – use your money to pay your debts
Christians against poverty – www.capuk.org.uk - a national debt counselling charity working through a network of 64 centres based in churches head office in Bradford ( tel 01274760720)
Citizens Advice bureau – www.adviceguide.org.uk – offers free independent and confidential advice (tel 02078332181)
National debtline – www.nationaldebtline.co.uk – offers helpline nformation pack & fact sheets – (tel 08088084000
Consumer Credit Counselling Service- www.cccs.co.uk - Offers a help pack & advise (tel 08001381111)
Business Debtline - www.bdl.org.uk - provides a free telephone debt counselling for self employed and small businesses. (tel 02078332181)
This article was written by Bibi Bunmi Apampa a Business Coach at www.MyBusinessCoach.biz
GET OUT OF DEBT FAST Get the strategy for Financial Freedom in 12mths |
RAISE THE CAPITAL FOR YOUR BUSINESS Get the strategy for Financial Freedom in 12mths |
The Expert In Me Coaching Programme |
|
read more
