Staying out of debt in today’s society can be extremely tricky. Remember not all debt is bad and loans such as mortgages, provided they are adequately managed, are not generally harmful. Getting into debt to fund a lifestyle that your income will not accommodate, however, is bad news.
Writing a SOA (statement of affairs) is the first crucial step to ensuring that you do not get into debt. Write down absolutely every bit of income, including benefits and any maintenance payments. Then make a full list of all outgoings. Don’t forget to apportion annual costs such as holidays and birthdays. This budget should give you a reasonable idea of your current status in terms of whether you are living beyond your means.
If you have sufficient income left over but never seem to have any money, it can be helpful to keep a spending diary for a week or two detailing everything you buy. You’ll be surprised how much that sneaky coffee on the way to work adds up every day!
If you simply do not have enough income to pay for your expenses you have two basic options; increase your income or decrease your expenses. A combination of the two should work to bring you within your budget. If you can, try to arrange for some form of debt reduction.
With debt, ignoring the situation is guaranteed to make it worse. Get debt advice, keep on top of your situation and you will be surprised how quickly things turn around!
If you are in a lot of debt, then there are two solutions to help you get back on your feet and these are bankruptcy or an IVA (Individual Voluntary Arrangement).
Bankruptcy is a decision that should not be taken lightly though as there are certain consequences when you declare yourself bankrupt. You will need to be prepared to lose certain valuable personal possessions in order to help pay off the debt. You will have to go to court and your money problems will become public knowledge and this can often be stressful time.
As well as losing material items, you also lose the right to be the director of a company, a member of parliament, a member of local authority or a lawyer.These factors need to be taken into consideration, especially if you dream of one day owning your own business.
If you become bankrupt then you will find it difficult to obtain credit in the future. Your credit history will stay with you for many years and simple things that you will have taken for granted in the past such as taking out a mobile phone contract agreement may prove impossible.
An IVA is a formal agreement with your creditors where you make reduced monthly payments and generally after five years, the rest of the debt is cancelled. This is a way of paying off up to 65% of your debt at a sensible rate and you will not have any privileges or possessions taken away from you. It is a private arrangement so no one but yourself and the people that you owe money to need to know about the IVA if you wish to keep it that way.
Bankruptcy is a quicker way out of debt, but you should only choose this option once you have thoroughly weighed up all the pros and cons as you cannot reverse it. An IVA will take longer to get yourself out of debt, but you have more control and it is kept private.
When debt comes in the door love flies out the window. Or maybe the other homily of:_ money isn’t everything – usually said by those who have plenty or enough to cover their bills and debt will never happen to them – or they think it won’t, although they are probably on the first slippery slope allready!
Fear is the usual reason to lie to a partner, what will they do, what will they say. If you do not like confrontation then do not get into debt or deception will be used to avoid it – at any cost.
Its the age we live in – credit cards, loans. Right now it has been realised what problems its all causing and the banks and loan companies are pulling back, in fact they are now in trouble and trying to borrow to keep themselves afloat, which in itself is causing huge problems for ordinary people with mortgages – the circle of debt!
Today, we find ourselves in an ever deteriorating economic climate. This means that many more people are struggling to meet payments and in turn have large amounts of debt to contend with. Luckily, there are means in which these problems can be eased.
One method is an Individual Voluntary Arrangement (IVA). An IVA is a legally binding contract between you and your creditors which aims to reduce the amount of money you have to repay. You will find that it is a good way to stop any further interest charges and to reduce your monthly payments. Consequently, you will have more money in your pocket at the end of the month in which to spend on other things.
Although IVA’s are an excellent solution for some, they are not always the best for everybody. Therefore, there are criteria which you must meet to be eligible:
• The debt is over £15,000.
• The debt is owed to three or more different creditors.
• You have figured out a sensible, realistic budget that you will be able to stick to in order to make my payments, allowing enough to pay for everyday basic needs, bills and general living costs.
• You are in regular employment with a steady income.
If you do not meet the above criteria then it is likely that an IVA is not the ideal solution for your debt problems. Even for people who do meet the above criteria, it is always advisable that you arrange a meeting with a debt advisor first as they will be able to inform you more about an IVA and any other available options. So there you have it, ‘what is an IVA’ in a nutshell.
When it comes to teaching our children about or how to do anything the best way is always by example. If show our kids that we are sensible with saving money and that we have to work hard to earn the money we spend then they will get a rounded idea about finance and spending/saving.
I have three small children and I am very conscious of how much I spend and on what. I explain very carefully to my children that I have to work hard and that there are bills to be paid and expenses such as food and clothing to be paid for before we can spend on luxuries. Each of my children have savings accounts, which they know about, we have encouraged them to put money into these accounts to save for their future, such as going to university, buying their first home.
In our home we don’t give the children pocket money but we do encourage them to earn money by doing extra jobs in the home and garden. Earning makes the children feel that they have achieved something, usually we let them spend some of this money on treats.
Should children be taught about finance in schools? When I went to secondary school we were taught commerce which was a mixture of economics and personal finance, it was a very useful subject. It can’t all be left to the schools but commerce and accounts does help to formalise the learning they have gained at home.
A student loan is a loan from your Local Education Authority (LEA) to help you through the growing pains of independent living whilst in Higher Education. Most current and prospective students will take the student loan (AKA maintenance grant) to help them pay rent and buy food. But not everyone might need one.
A student loan is a voluntary loan which is applied for each year you are at University. This means if you don’t want the burden of an ever interest-accumulating debt hanging over your head, you can not apply for one, providing you can fund yourself in other ways. Some students study close enough to home that they don’t need to rent a house or buy food. Others who are on a part-time course may be able to have paid work to see them through. Or you might just have the means to take care of yourself already.
For many, student loans are one of the major causes of debt. For those that don’t need to take out the loan, it might be worthwhile to take out the basic £3000 amount and invest the money in a mini-cash ISA or premium bonds. The student loan does gain interest, but only according to inflation. If your investment is better than this, then it could be worthwhile doing some research.