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A great many people are struggling through the current economic downturn, which has caused millions to sink deeper into debt. Indeed, many are finding it nigh on impossible to get themselves back on track. If you are one of them here are a few steps you can take that may just help.
Make an Assessment
The first thing you will need to do is to make an accurate assessment of exactly how much money you owe in total. At the same time, you should identify all your creditors. After these steps have been taken, you can prioritize the debts; for example, if you owe the bank money this is the debt that you should probably attend to first, while if you owe a friend or family member a few pounds, speak to them to see if they can wait awhile. In addition, it is a good idea to take a look at the interest rates of each debt, should interest be applicable. The far better option is to pay off those debts that have the highest interest rates first. This a method that is generally known as ‘laddering’ and can be fairly cost effective. If, on the other hand, all the interest are about equal, the next best thing is to pay off the smallest debts first. With the smaller debts out of the way it will prove far easier to assess your situation and you can start to set goals for paying off the larger debts.
Set Targets Next, you should set yourself payback goals and make a determined decision to stick to them. Be realistic and make an accurate account of how much of your income you are going to have to spend on the essentials, taking into account anything that is likely to crop up. Then you can decide how much you are likely to have left over. Next you can divide this amount between your creditors, applying the same logic concerning priorities as described above. Decide how much each month you can pay back to each creditor and promise yourself you will stick to this plan. You should now be feeling a little better about things. However, if you have found that you will have little or even nothing left over after you have paid for what you see as the essentials, you may need to look again at your lifestyle.
Making Cutbacks
You are going to need to find ways to cut down your spending if the points mentioned above apply to you. Try to draw up an accurate account of what you spend each month and where the money goes. You may find you are spending money on things that are not essential to everyday living, regardless of however much you may want them. Unfortunately, the fact is that, until you have paid off your debts and got yourself back on track, you are going to have to be tough with yourself and cut out spending on anything other than what you really need. Go through everything that you spend money on on a regular basis and ask yourself whether you really need these items. These are just a few tips to get you started on your road to economic recovery. The process will likely be a whole lot more complex than this. However, the important point is that you have a plan. Without working out your finances and plotting a repayment strategy, getting things sorted will be so much harder. Once you have a plan in place you can always modify it as you go.
About the Author: This guest post was written by Francesca on behalf of IVA Expert. If you’re concerned about mounting debts, you should try the IVA Expert debt management plan.