Tips and Advice on Minimising Your Debts
Minimising debts can occur through a combination of cutting back on outgoing expenses, changing your spending habits and cutting out high interest loans and credit cards. Bad money mismanagement can leave a lot people sliding gradually into debt. Many people know that to cope with the rising financial costs in society they will have to accumulate a certain amount of debt, but keeping debts at a minimum is vital. Minimising debts will take a lot of effort and willpower but will be worth it in the long run.
Household Debts
Household expenses are a priority and there is no way to avoid them. There are ways to save on household energy expenses such as gas and electricity; if you get your energy from different suppliers then combining them could save you a lot of money per year. Energy companies are in competition with each other and you may find you get a better deal by shopping around and switching companies.
Other household expenses that are priority will be items such as the weekly food shopping bill. The only way to minimise the cost of these items will be to shop around and find cheaper suppliers. The main aim of reducing your household bill is to free up some of your income that can then be used to pay off serious debt.
Credit Cards and Loans
With most credit cards and loans, reducing the interest that you pay should be paramount. If you only ever pay off the minimum amount you are probably only paying the interest and not reducing your overall cost. The interest will then be added again and it could take years to pay off. The best way in minimising debts on credit cards is to try and pay off large chunks at a time; it would be wiser to use savings to pay off credit cards completely rather than pay the interest.
You may have savings in a "rainy day" fund, but if you are paying interest fees month after month then that rainy day has arrived. Minimising debts is also about making your money work for you, and paying interest fees on multiple credit cards and loans is basically throwing money away.
Seeking Financial Help
You may have debts that are spiralling out of control to the point where you are paying a large amount of your monthly income towards debt. It may be the time to seek help from a debt counselling service that will be able to talk to your creditors on your behalf and minimise your debts. There are debt counselling services in the UK that do not charge fees and are registered as charitable organisations.
Bank Charges
If you find that you are always sliding into the red due to bank charges and penalties being applied to your account then you will be paying a lot of money to your bank. Try phoning your bank, explaining the situation, and reclaiming the charges. If your own branch does not give you back the charges then go over their heads to the customer relations department at the head office. They will look into the problem and will usually offer a repayment as a gesture of goodwill.
Bank charges on overdrafts, missed direct debits and standing orders are profits that go directly to the bank. These charges can mount up in no time and can seriously damage your finances. The best way not to have charges applied is not to go into the red.
Pay with Cash instead of Credit
Paying with cash instead of using your debit or credit card is the best way to keep track of your finances. Paying by cash means that you will need to go to the cash machine and check your balance; therefore you are more likely to know when you are near your limit. Paying with cash also means you are unlikely to splash out on impulse buying on your credit card.
Minimising debts can be achieved with some astute financial planning and budgeting but it will take time and effort. Debt is easy to achieve but never easy to get rid of, and curbing the desire to spend is difficult for some people. Do not be disheartened if you slip up now and again; think of the process as a long term plan that will eventually bring you to a debt free existence.
