Managing Debt

A survey completed in 2018 by the financial conduct authority (the financial lives of consumers across the UK: Key findings from the FCA’s Financial Lives Survey 2017) showed that 20% of the population of Northern Ireland were over-indebted with 10% in immediate financial difficulty. This survey was taken before Covid and before the massive rise in inflation we have experienced over the past year so these figures may now be much higher. 

There is often a lingering stigma that debt is due to being careless with money or being disorganised with our finances but for the majority of people this is not the case.  Life changes such as redundancy, separation and mental or physical health problems can all be common triggers for issues with debt.  

Debt itself is often seen in a negative light however this is not the case if you are making an investment in your future.  This could be paying towards a mortgage or taking out a student loan, these may be necessary to help you to take the next step in life. Debt becomes an issue when your income no longer covers your financial commitments or when it has become a source of stress in your life. 

Debt can have a massive impact on our mental health. This can include anxiety, depression, sleep issues and may affect our relationships with family and friends.

At times it may feel like your debt is too high and will be impossible to reduce. It can leave us feeling isolated and overwhelmed but there is hope and here are some ways to better manage your debt or even reduce it.

An account Spring Clean

This involves making a list of all your Direct debits and cutting out any unnecessary spending, often we don’t pay attention to the small outgoings such as Amazon Prime, Spotify, expired insurances or  unused membership to gyms or streaming services but these can all add up to a significant amount per month. The second part of the spring clean involves spending a month tracking your spending, often we forget about the £5 lunches or £3 we spend on coffees everyday but as the saying goes if we look after the pennies the pounds will look after themselves. Being strict and separating what we want from what we need can really help save some money. 

Prioritise Your Debts

Make a list of all your debts starting with your high priority debts –(these are the ones where the consequences of defaulting  may be serious and would include Mortgages, Loans, Credit cards and energy bills) 

Consolidate

By adding all your unsecured debt into one loan could potentially reduce your monthly outgoings. Knowing how much interest you pay on each debt can be really helpful and show you where reductions could potentially be made. 

For example if you have a credit card with a balance of £4000 with an APR of 24% and paid the minimum payment of £100 per month this would take 6 years to pay off costing a total of £3171.48 on top of the original £4k borrowed WHEREAS If you transferred this debt to an unsecured personal loan you could half the overall interest paid For example, £4000 with an APR of 14.5% paying £92.28 per month would take 5 years to repay with interest costing £1536.80.

Balance Transfer to a 0% Interest Credit Card

If you are not paying the full amount of your credit card each month you will be charged interest unless you are currently in a deal. Often we just stick with the same credit card and pay interest that we don’t have to pay. There are plenty of free balance transfer offers out there that could potentially save you money. Websites like compare the market or moneysupermarket.com can help find you a suitable card without affecting your credit file by checking your eligibility before you apply. 

No Spend Challenge

Lots of people have introduced a no spend week into their month, this means packed lunches for everyone, using the remains of whatever is in the cupboards for dinners, making fakeaways instead of takeaways - no unnecessary spending.  Whatever you have saved in the week can be put towards one of your debts. To choose which debt to tackle first always starts with the one with the highest interest rate as this will be costing you the most money overall. 

Contact lenders

This point is really important but is one that people are often embarrassed or afraid to do but letting your lenders know what position you are in can be really helpful. Often they can put your mind at ease and then the dread of phone calls from unknown numbers or the fear of the letterbox going can really be reduced. This can be a positive step towards managing your mental health while dealing with debt too. 

Get Advice

If you feel you need to speak to someone, you can contact Advice NI Debt | Advice NI who are happy to go through your personal circumstances to give tailored advice and guidance.  

Emotional Support

Historically there has been a real taboo around being in debt and often people are embarrassed and find it difficult to talk about with family and friends. Dealing with debt alone can make it an even bigger burden to carry so where possible try and be open and honest with loved ones.  If you feel like the stress of debt is taking a toll on your mental health you can always speak to your GP who may be able to refer you for some free counselling sessions. 

Benefits Checker

Check you are getting what you are entitled to-  Entitled To’s annual survey in 2022 (Our annual review suggests about £15 billion of benefits remain unclaimed each year (entitledto.co.uk) suggest that £15 billion remains unclaimed in benefits each year.  If you think you may be entitled to something or are simply unsure you can use their website to check. 

Debt is absolutely nothing to be ashamed of and there is plenty of help and advice out there, if you are struggling please don’t suffer in silence, take control back and reach out.