How can you budget your finances to repay debts?
If you’re struggling to pay off your debts, it may be worth starting to budget your income to better manage your finances. Sticking to a budget can help you reach your financial goals faster and help you clear those debts.
Read our guide on how to budget your finances to pay off your debts.
Why is it important to repay debts?
Looming debts can be incredibly stressful, posing a risk to your financial security. The longer they are left outstanding, the more interest they will gain, making them increasingly more difficult to manage in the long run.
You should prioritise paying off your debts every month so you can clear them sooner rather than later. Aim to better budget your finances and treat your debts like a bill, choosing a set amount to come out of your account every month.
Budgeting your finances
Start to be strict with yourself and create a rigid budget that will help you make the most of your money. Identify your total income and work out your monthly outgoings to see what money you have available.
Can you reduce your monthly spend on some items? Is it worth cancelling a subscription that you no longer need? Think of ways you can cut back your spending and you’ll soon have more money readily available to pay off your debts.
Debt repayment strategies
You may have debts with larger interest rates than others, often known as the “problem debts”. These will end up costing you more money as time progresses if they are left unsettled. To save you the most money, prioritise clearing these debts first.
Alternatively, clearing your smaller and easier debts first may work best for you. This will help with motivation to clear your remaining debts, ticking them off one by one.
Dealing with high interest
Using loans with high interest rates is a significant reason as to why your debts can become increasingly difficult to clear. Instead, you could try taking out a loan with a lower interest rate than your outstanding one to repay the debt with the higher interest, while making sure you can meet the repayments of the lower interest loan. You may not be able to qualify for a loan with a very low interest rate if you have outstanding debts already, however, finding one with a marginally lower interest rate can help that extra bit.
This will help to clear the increasing debt you’re in and provide you with a more manageable interest rate, enabling repayments to be made more easily, giving you a bit more peace of mind.
Getting help
Debts can have a serious effect on a lot of people. If you’re struggling to repay your debts, it’s always a good idea to reach out for help and advice such as the Step Change Debt Charity who provide free expert debt advice.
You should also seek medical help if your debts are negatively affecting your mental health. There’s always someone to talk to if you need it.
