What To Do if Debt is Consuming you
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It’s estimated that 15% of UKs adult population is in debt. As the cost of living continues to rise, many Brits find themselves struggling with unsecured debts like credit cards and payday loans.
A recent study found that one in five Brits are unable to save any money monthly. According to Google trend data, the search term debt and depression has received a 9.900% uplift in the past 3 months. Such an increase reflects the emotional turmoil debt can cause.
Here, MoneyPlus presents how to navigate the emotional stresses of debt along with 3 proactive actions to become debt free.
50-30-20
According to the Office for National Statistics (ONS), the average UK weekly wage in October 2023 was £663, equivalent to around £34,476 per year for full-time employees. This works out at approximately £27,904 after tax. Adopting a saving challenge is a tangible means that works to not only ease anxiety but work to save up to £1000 by Christmas.
The 50-30-20 challenge presents the opportunity to confront your finances head on, so you know exactly what is going where. Breaking your bank statements down into 3 categories, the 15-30-20 challenge can see you save up to 30% of your salary each month.
To make budgeting simple, there are three categories that your monthly income (after tax) can be broken down into:
- 50% on “essential needs” – Essential needs are your outgoings that you can’t go without. Things that fall under this category include rent/mortgage, household bills (electricity, gas, water, broadband), food, transport to work, mobile phone contracts, minimum repayments for credit cards or loans, and insurance
· 30% on “wants”- Wants are outgoings that you don’t necessarily need to get by, but things that you like to spend money on. These are non-essential expenses, so things like shopping for clothes, holidays, eating out or takeaways, subscriptions (Netflix, Spotify, Amazon Prime, for example), memberships, and gifts for celebrations (birthdays, Christmas, weddings, etc.).
· 20% on savings or debt repayments – the idea behind this technique is that you’ll have 20% left of your income to pay off any debts beyond the minimum repayments to help clear them faster, or to put into your savings. When you have a savings goal in mind, it helps you stay on course.
– Log Your Wins
Keep a diary of all your progress. Whether it’s paying a minimum payment or skipping buying a takeaway to save money, keeping a diary of positive actions that you have taken to aid in gaining financial freedom. Keeping a log of all your financial wins serves as an asset to refer to when you are feeling anxious about your debt. This works to boost morale as well as provide motivation to carry on.
– Don’t Ghost Your Lender
It’s easy to bury your head in the sad when you feel overwhelmed, intimidated and worried however, talking to experts can reveal opportunities that you never knew existed. For instance, Individual Voluntary Arrangements (IVAs) offer personalised repayment plans tailored to individual financial circumstances. Ensure that any payment plan that you agree to is sustainable for you in the long term, and not just a temporary solution.
