We’ve made it to Thursday! How’s your budget going? Today’s activity is all about debts, and keeping an eye on your borrowing. (If you don’t have any debts then scroll down to the bottom of the page for an alternative activity about assets).
The last week of February is one of the most common times of the year for people to realise that they’re struggling with debts, so now’s a good time to have a look at your own personal situation. Do you have any post-Christmas fallout, or is it pretty much under control? This exercise can be useful either way.
How to check though your debts
- Collect all your borrowing information together, including overdrafts, credit cards, short or long term loans, store cards and the newer buy-now-pay-later services if you use those.
- Exclude your mortgage and student loans from this roundup.
- Note down how much you owe to each creditor, and how much interest they’re charging you, plus any additional fees.
- Make sure you know the APR (annual percentage rate) every bit of borrowing.
- Compare your monthly outgoings on your debt repayments to your total monthly income. Does it take up a large amount of your take home pay? Are you struggling to make the minimum repayments each month or are you okay?
- Do you have any missed payments? If so, contact the lender today to make up the missed payment or to tell them if you are struggling – they tend to be more flexible with people who keep in contact with them.
- If your debts are seriously worrying you, contact a non profit organisation such as StepChange debt charity or Citizens Advice for help and information. They can help you work out a realistic repayment plan and deal with your creditors.
- See whether you can change any high interest borrowing to a lower interest or interest free product.
- If at all possible, do not do any further borrowing on your credit cards, overdraft or short term loans.
- Re-draw your household budget to allocate more to debt repayments if you can.
- If you have any easy access cash savings, use at least some of them to pay off your debts faster.
No debts? Great! Try this:
- Have a look through your savings, investments, and financial products.
- Make a note of how much you have saved up or paid in.
- Look at the interest it’s earning, how well investments are performing, and whether it’s tax efficient (such as in an ISA wrapper).
- Is it all going in the right direction? How is the rest of the market looking? Could you be earning more interest in a different savings account, for example?
- Decide whether you want to meet with an independent financial adviser to discuss your finances.
- Think about your short term and long term goals and plans. Have they changed since the last time you thought about them?
That should give you plenty to be getting on with today, and then to change the pace tomorrow is going to be more lighthearted and fun.