MILLIONS of households are on a knife-edge, with finances stretched to their limit.
Last month, Citizens Advice received more requests for crisis support than ever before.
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Six in seven people will be running on empty by the end of this year, according to investment firm Hargreaves Lansdown.
We are being hit by a triple whammy of soaring inflation, rising interest rates and soaring bills.
Clearing debt is hard – but with money tighter than ever, it has never been more important.
Our tips will help it become less of a burden.
1. Start with a budget
KEEPING out of the red means taking control of your finances.
Creating a budget is the single biggest step you can take to get on top of your finances, according to debt charity National Debtline.
Make a note of how much money you have coming in. Then work out what your essential living costs are.
Don’t forget to include things you pay for annually as well as monthly, such as car and home insurance.
Divide this number by 12 to work out how much you need to put aside to cover your outgoings.
Include a list of debts, outstanding balances and monthly repayments.
2. Cut costs
COMPARING your outgoings to your income will be revealing. If you’re spending more than you earn then your debt will climb every month and you need to take immediate action to cut down.
“Be realistic about your budget and include a buffer for the unexpected – you have to be able to live on this for a long while, not just scrape through one month,” said Sara Williams of blog Debt Camel.
3. Avoid disaster
UNPLANNED spending is the road to financial disaster according to experts.
But learn to say no to sudden splurges and you’ll slash back your debts.
“It’s easy for us to impulse buy anywhere and everywhere,” said Paul Day of well-being charity CABA.
“The internet knows what you like and therefore will encourage you daily to spend money. Resist the urge.”
Sara Williams adds: “If online purchases are your weakness, unsubscribe from all brand emails and delete apps from your phone. You can still buy things, but the constant temptation is removed and it is just a bit harder to spend.”
4. Claim cash
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A CHANGE in your circumstances can mean you might be able to claim benefits or financial help from a range of organisations.
If, for example, you lose a few hours at work, or you develop health problems, you may be able to get extra support.
The Turn2Us.org.uk website can help track down any extra financial support you may be able to get from a range of charities, trust funds and other benevolent organisations.
5. Change your habits
THERE are obvious things you can cut back on to save cash – such as ditching or pausing services you no longer need or use, including gym memberships or expensive online subscriptions.
But it’s equally important to change habits to ensure that you don’t fall back into debt by spending unwisely in the future.
“Part of clearing debt once and for all will involve changing old habits into new habits and more purposeful spending,” said Paul Bradley of wealth manager St James’s Place.
One of the most important choices is finding a method that works for you.
The avalanche method involves making all the minimum repayments on your debts, and then devote any remaining funds to paying off the one with the highest interest first.
Once that’s wiped out, you move to the next most expensive borrowing, until it’s all paid off.
In the snowball method, you pay the smallest debts first.
That can give you a psychological boost, but do keep in mind that it might take longer to clear your debts and this could cost you extra money.
“Whether you use the debt snowball or avalanche method, the most important thing is that it works for you,” said Andy Shaw of debt charity StepChange.
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6. Cut your debt costs
TAKE a look at your credit cards. Can you save any money by switching?
“If you have a good credit rating, you could switch all your borrowing to a low-rate credit card,” said Sarah Coles of Hargreaves Lansdown.
Typically, you could get an interest-free deal for up to around two years – but it only works if you use that time to pay off your debts.
Fail to do so and the interest charges will soon mount up again.
7. Get free debt help
GET free, independent advice from debt charities such as National Debtline (nationaldebtline.org), StepChange (Stepchange.org) and Citizens Advice (Citizensadvice.org.uk).
The sooner you seek their help, the quicker and easier your problem will be to solve.
