Recession is an unpleasant time for everyone. Constant headlines shouting the depressing news that the country’s finances are not in good shape, tales of long-established businesses going to the wall, job losses… nothing greatly positive there. With the world economic crisis rumbling on into yet another year, it has felt as if gloomy economic news is par for the course in our current environment.
Yet there are ways to think positively and the country being in recession by no means is an indicator that your own personal finances will suffer terribly too. As with anything financial, the only way to face a recession is head on. Planning carefully, budgeting within your means and taking responsibility for your personal finances will help you ride out the recession safely.
It’s important that you plan around your actual income, not rely on extras, like overtime or bonuses. It is easy to get into debt at any time in your life, but especially during a recession. If you have racked up debts then it would be easy to think that external financial circumstances will render it impossible to get yourself out of debt. This simply isn’t the case and there are a number of things you can do to help yourself get back on an even keel…
Dealing with Debt Effectively
Start by establishing exactly how much debt you actually owe. Include absolutely everything and look at what the monthly premiums are for each loan, credit card or other borrowing. Next, you need to ascertain what your incomings are. Here comes the tough part; you need to stop borrowing. The spiral of debt is made worse by borrowing from one place in order to pay off a debt in another. You need to adapt your lifestyle so you are living within your means. Nice cars and luxury holidays are lovely, but you need to have the means to fund them and your priority right now is getting yourself out of debt. When you are debt free and have a little more disposable income, then you will be able to enjoy these types of treats within your budget.
From here, you need to make a strict priority order of which debts you need to pay off. Your mortgage is imperative and, of course, your monthly bills and household expenses need to be paid regularly. But with your credit card or loan debts, you need to see which ones you are paying the highest interest on and get these cleared as soon as possible. If you’re unsure how much extra you will repay on your overall debt, you could use this handy interest calculator tool from Baines & Ernst.
Also, you could find out if you can transfer as much of your credit card debt as possible onto a low – or even zero – interest credit card as repay as much of the debt as possible.
If you have lots of unsecured debts like personal loans, credit cards and store cards, you could consolidate these debts with a solution such as a Debt Management Plan or an IVA. You don’t have to lend money with either of these solutions, instead you’ll be repaying your debts at a rate you can afford and have the peace of mind knowing that your debts are being taken care of by a professional debt management company.
Managing Debts If You’ve Neen Made Redundant
If you’re made redundant, the best thing to do is to contact your lenders and inform them of your change in circumstances. They may be able to help you arrange a repayment plan or you could even qualify for a payment break.
If you’re entitled to job seekers allowance, you should also see if you qualify for additional benefits to help with housing costs and council tax reductions.
And if you’re struggling with debt repayments, you could speak to your local Citizen’s Advice Bureau who can speak to your lenders and help you arrange an affordable repayment plan while you’re out of work.
This post was made possible by Baines & Ernst.