Taking the first step towards debt discipline

The first step is always the hardest. It’s one of the most well-worn idioms in the English language and is particularly appropriate when it comes to debt discipline. At its heart, a money problem is no different to any other difficulty in life when it comes to ways to overcome it.

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Yet while we are quick to go to the doctor if we have a medical problem, or seek technical help when the internet connection goes down, when we see our finances spiralling out of control, it is only too common that we will stand back and watch it happen. Fear, shame, disbelief and helplessness are all emotions that we are likely to experience. And they can contribute to making the problem escalate.

Be honest with yourself

If you can’t open your eyes and see the problem for what it is, and one that needs to be solved, you won’t get anywhere. Rip the band-aid, pull out all your bank statements and lay the whole situation out straight. Once you’ve done so, you know exactly what you are facing, and whether it’s better, worse or about the same as you were expecting, you’ll feel calmer having removed the factor of the unknown.

Prioritize the debts

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Clearly, you need to make sure the mortgage or rent is paid, so debts like these have to be at the top of the list. From there, look at the different credit cards and agreements. Any that have a high-interest rate needs to be the next priority. If you can get them paid off, great, if not, see if you can transfer them to another lender with a more favourable rate.

Don’t try to do it all alone

There are plenty of tools available for managing debt, just as there are in any other area of finance. And by the same logic, those who work in debt management for a living are going to have the best information and knowledge on which option is the best in your specific circumstances. Some might sound scary, but the key to it is facing the problem in the same way as you face any other.

Two of the most common tools are debt management plans and individual voluntary agreements. You can read in more detail here about these options, but to give you an idea, here’s the short form:

Debt management agreement

This is an agreement with the creditors that you will repay a set amount each month. It sounds like a standard credit agreement, but the difference is that it is based on what you can afford, which might be less than the usual minimum repayment.

Individual voluntary agreement

The creditors agree to write off a proportion of the debt and will accept a fixed monthly sum for the rest. The IVA is set up by a third party and has a set end date. It’s a great way of clearing your debts, but it will have an impact on your credit score.

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