Most of us have been touched by debt at some point in our lives and with credit readily available it’s easy to let our finances get out of hand. Unexpected expenses like problems with your car can lead to bank charges or credit card bills. Now I’m living on my own for the first time I’m determined not to slip into the red and build an emergency fund for those one off payments. Budgeting has become a priority and I have spent time trying to reduce my outgoings and tidy up my finances.
Having created a spreadsheet with my earnings and outgoings I know what I have to spend in each category every month. To make sure I stick to it I’ve decided to use The Envelope System. As people tend to spend less when using cash the idea is that you put the allocated amount into envelopes with the name of what they are to be spent on written on them.
Every penny spent in each category has to come out of the specific envelope and any change should go back in. When the money runs out of each envelope you can’t spend anymore until the new month begins.
Any money left over can be put into savings or if you haven’t budgeted in any treats it can be used to go out for dinner or to see a film.
If you live in Scotland and are struggling with debt Debt Therapy Scotland can help. It may be possible to organise a Trust Deed. This is a voluntary agreement between a debtor and their creditors (the people they owe money to) to repay part, or all of what they owe and may help you write off debt you can’t afford. Government backed it transfers the debtors rights to the things that they own to a trustee who will sell them to pay creditors part of what is owed to them and will normally include a contribution from income for a set period, usually 48 months.
This solution is for people with debts of £5,000 or more. If you owe less than this it’s a good idea to see if you can move debt to a cheaper credit card or loan. It’s important to pay off high priority debts such as rent or mortgage payments, utilities, council tax etc first before moving on to paying off the highest interest credit cards or store cards.