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FOOL'S EYE VIEW
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If your money problems are pushing you towards the edge of financial disaster, now's the time to take the bull by the horns and deal with them. If they're merely giving you a slight itch, then perhaps now is a good time to head off future problems. Beating debt is simple - but not easy. It's simple, because all you have to do is spend less than you earn - forever. And the reason it's not easy is because a moment of weakness, or an unexpected turn of events, could leave you scrambling to climb out of the hole you've dug yourself into. Have courage though - you may have a hard slog ahead of you, but it'll be a strangely satisfying one. Honest! Change Your Attitude This is probably the single most important tip you can take on board when trying to get out of debt. And it's free! If you can learn to distinguish between 'needs' and 'wants' and be completely honest with yourself about how well/badly you handle your money, you're half way there. Face up to your demons - and that means telling your partner everything (if you have one) and enlisting their support. Make a plan of action. Contact Your Creditors Picking up the phone to talk to your creditors is about as much fun as a trip to the dentist, but it has to be done! And you may even be pleasantly surprised by the reaction. When push comes to shove, most lenders would rather not bring in an expensive debt collector. They'd rather work out a repayment plan that you can handle, which could include reducing the interest rate you're paying. So call them, tell them you have a plan of action - and that you need their help to enable you to pay them back in full. Set Yourself A Budget You can't make a plan of action without knowing how much money is coming in each month, and where you're spending it. Keep a diary for a month: jot down every single penny of expenditure. After a month, you'll see exactly where your money's going and how you can cut back to free up money to put towards your debts. If you can make your own sandwiches, stop buying newspapers and cut out the takeaways, you'll have more money to throw at your debts. Sell Stuff Take a good look at your vast DVD/video/CD/book collection and ask yourself if it's really that important for you to be able to watch Pirates of the Caribbean: The Curse of the Black Pearl whenever you feel like it! Admittedly, watching it helps you forget about all the red reminders that keep dropping through your letterbox, but they'll still be on the doormat when you've finished the film. Trawl through your home for anything that you don't really need, sell what you can and put the money towards your debts. If you're that desperate to see/listen to/read an old favourite, go to the library! Make Your Debts Cheaper Transfer as much of your debt to 0% credit cards as your credit rating will allow. You want your money to tackle the source of your problem - the debt - so try to make sure that as little as possible is being wasted on interest payments. Snowball your debts by paying the most expensive ones off first, while making minimum repayments on the cheapest debts. The sooner you get the expensive interest out of the way, the better. When you finish paying off one debt, throw the resulting spare money at the next one. Stop Using Your Credit Cards We all know how easy it is to whip out a credit card, but the last thing you want to do is to add to your debt mountain. Leave your cards at home, freeze them in water, or cut them up if that's what it takes to stop you using them! If you must carry one for emergencies, make sure that you use it only when you absolutely have to. A half-price widescreen television is not an emergency and, no, you don't 'deserve' it! Get Cheaper Deals For The Essentials You may not be able to cut your Council Tax bills, but you could switch your electricity, gas and phone to cheaper providers. The same goes for your weekly grocery shop - several of the biggest and well-known brand-name supermarkets are more expensive than you might think. Consolidation Loans Be careful about these. Human nature being what it is, you may think that by consolidating all your debts into 'one easy monthly payment', you'll be able to gain control of your problem. But it's very likely that you'll think the problem is solved when it isn't. The majority of people who take this route go on to run up further debts, because they think that they've 'cleared' their current ones. They haven't: they've simply combined them. Don't make the same mistake if you opt for a consolidation loan. Borrowing your way out of a problem only works if you don't borrow any more! Remortgage To Release Equity No, No, No!!! This should not be an option unless you are utterly desperate. Borrowing against your home carries potentially serious risks if you can't keep up the repayments. Any loan secured against your home could result in you losing it so, although a mortgage is a 'good' debt because it's cheap and you end up with a valuable asset (your home), don't risk turning good debt into bad. Your mortgage enables you to buy your bricks and mortar, not clear debts. Only do it if you are absolutely certain you can easily meet the extra repayments. Get Help If you don't think you can tackle your debts by yourself, then get help from a free organisation such as the Consumer Credit Counselling Service or Citizens' Advice. They can help you negotiate with your creditors and sort out a repayment schedule. Sorting out serious debt can be a long hard slog and their support is often invaluable. It goes without saying, but I'm going to say it anyway, avoid agencies that charge you for help. Your money should be going towards your debts, not into their pockets! Finally, it's in everyone's best interests - both yours and the people to whom you owe money - to get you out of crisis mode and into a repayment plan that you can handle. Nobody wins if you spiral down to bankruptcy, so take a deep breath, gather up all the determination and willpower you can muster and start tackling your debts before they start tackling you! Check out our Get Out of Debt centre | 25 Quick Money-Saving Tips | Snowball Your Debt Away.