It's hard to get through the day without seeing debt and coronavirus in the same headline. Extraordinary circumstances call for a different approach to getting and staying debt free.
According to Peter, our Head of Advice, the principles are still the same. \"Firstly the focus must be on living within your means and secondly you must stick to it. This is sound advice in any situation, even in the middle of a pandemic.\"
We asked Peter for his top tips for getting on top of your debt in a pandemic (or any time for that matter) and here's what he told us:
Start with a budget, to help you avoid getting into any more debt. This is the hardest part. In short you need to stop spending what you haven't got. This means listing out all of your income and outgoings.
\"This is where most people go wrong. This must be done over a year, not a month if not it will be a useless exercise. Why? Because it wont capture the 'irregular regular' outgoings, for example holidays, birthdays, Christmas, annual insurance policies etc\".
Work out your net disposable income (income minus outgoings) by month and over the year, to see if you have any cash to spare. A yearly budget makes it easier to allow for big costs like summer holidays and Christmas. If you're running short, getting a grip early is really important. That's where Peter's second top tip comes in.
Start looking at what you can give up. Have a look at your memberships and subscriptions: newspapers, magazines, Netflix, Spotify, Amazon, clubs, and gym membership. Do you really need them?
Separate the \"nice to haves\" from the essentials. Once you have established what the nice to haves are, you can take your first action: cancel them.
Now look at the other stuff, what else can you cut back on? Small changes add up and can make a big difference.
Next, give yourself a bit of breathing space by reducing the interest you're paying on your debt. Credit card transfers and overdrafts to replace credit cards are two of the most common ways to do this.
Pick up the phone and talk to your lenders. There are lots of things they can do, especially now. So don't be afraid to talk to them and explain your situation in order to find out what they can do to help.
This is controversial but in Peter's own words, \"don't be afraid to admit you have a problem\". Burying your head in the sand won't make it go away.
Throughout his career Peter has seen people do some crazy things even to protect a 'credit score'. He has seen people get into more debt by paying the minimum required, only to find out their credit score was getting lower and lower because of the amount of debt accruing in the first place.
Taking the first step is always the hardest, but there's plenty of help out there.
In the next article we'll take a look at what help is available and how to go about getting it. In the meantime, you can send any questions to support@multiply.ai.
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