This week we're tackling step 3 of our 4 step debt action plan: recover from debt and stay in control of your money for good
Paying off your debt is no small feat, so making sure you stay on top of your money is crucial for your financial and personal happiness.
As well as patting yourself on the back for what you've achieved, there's plenty that you can do to develop good habits and prevent yourself from falling back into old ones. Here are our top tips to help you stay in control and enjoy life.
To help you reach your goals and take control of your debts we’ve broken the process down into 4 manageable steps, giving you easy to follow to-do lists to help you master your money. If you've missed steps 1 or steps 2 check those out first for tips on working out where you stand and for paying down your debts.
Keep using your budget
We know what you're thinking. 'Make a budget' - how groundbreaking. But it's honestly one of the best ways to make sure you always feel in control of your money, rather than feeling like money controls you. Hopefully, you’ve become a master budgeter after following our tips to pay down your debts in step 2. Even if you haven’t there’s no better time to start than now. Your budget will help you stay on top of your money, know exactly where it all goes and even allow you to set (and more importantly achieve) any personal goals.
Consider the impacts of borrowing
The majority of us need to use credit from time to time to fund big purchases, and when managed well this is normal. But if you've struggled with debt in the past you may want to go slow with credit to begin with.
If you do want to borrow money again in the future, really consider what you can afford (go back to your lovingly prepared budget), think about why you're borrowing and whether using credit is a good option for you. Use direct debits where possible to make sure you don’t miss payments. You can sign up for alerts from your bank so you can keep track of exactly when the money is going out.
And if you don’t think you’ll be able to resist them, close any credit accounts you don't need.
Keep tabs on your credit file
If you're recovering from debt and have lots of missed payments or a court settlement on your credit report you may not be able to get the best offers just yet.
But don't worry, there's plenty of things you can do to repair your credit score. Try to spend little on often on a credit card. If you treat it like a debit card, only spending money you know you have, then you'll stay in control and show lenders that you can now manage credit like a pro.
As you recover, so should your credit score - this will be a great way to see some positive change over the longer term and it will also help you to know your options should you need new financial products.
Now you can start to think about that holiday, building up your emergency fund, or saving for life after work - all thanks to your masterful budget.
Consider future life events - buying a home, kids going to university, let these events influence your priorities, savings, and overall money objectives rather than accumulating unmanageable debts for things you don't particularly care about.
Be a savvy consumer
Know what you’re buying and why. Make sure you’re always getting the best deal by doing some research and not making impulse buys.
Make sure you’re getting what you’re due - stay on top of changes to benefits, check your tax code if you change jobs or have changes in employment income.
Make use of employee benefits - if you’re working then make sure to get the most out of your employee benefits. It’s easy to forget all that’s available especially if you’ve been working for some time.
Recognise the signs
Try to spend some time reflecting back to when your debt started to feel unmanageable and try to understand what triggered the debt in the first place. Was it emotional spending or the pressure of keeping up with friends or something else entirely? If you can recognise what led to the spending habits that first got you into debt, you'll be better placed to nip them in the bud before they become a problem. If you feel like you may be slipping back into your old ways, there's no harm in reaching out and getting some help.
Work on continually improving your relationship with money
Building up a healthy relationship with money takes time and just like with any relationship, there are going to be ups and downs. If you've been dealing with difficult debts think of it like a rough patch: debt doesn't have to define your whole relationship with money, just as debt doesn't define you.
The key thing is to learn from the past and work on developing better and more sustainable money habits for the future. Learning how to manage your money in a way that works for you will help you stay in control and move forward.
Appreciate your accomplishments
You got out of debt, that is a huge achievement and definitely not to be forgotten.
Step 2 is all about actually paying down those debts. Our article is packed full of tips and tricks to get on top of your debts.