Clever money management - the key to tackling debt

thinkbanking offer their tips for managing your debt more efficiently:

Act quickly

Try to pay bills as soon as you get them - it's not always possible but it is almost always the best course of action. If you delay paying bills, you need to be certain you can afford them at a later date (and before you start getting reminders). If you're struggling to pay your bills, you need to review your finances.

Consider paying your bills by Direct Debit as you may get a discount. Also, it's easier to budget if you know what you'll be paying every month - and regular payments mean you shouldn't be hit with a massive annual bill that is difficult to pay (although annual payments can be cheaper in some cases).

If you're having problems with bill payments, or sticking to your monthly budget, don't let these problems escalate - act sooner rather than later and get advice if you need to.

Look at your bank account

Make sure your bank account is giving you everything you need - and that you're comfortable with any fees you're paying. There are many different bank accounts out there to choose from. You may find a different type of bank account could help your financial situation in the long term.

Sort out debt

If you're in debt, look at where those debts are and whether you're incurring charges on them.

Some examples of charges include overdraft fees, returned payment fees and late payment fees. If you're getting further into debt this way, try to cut these fees out altogether with a proper budgeting plan.

It's usually a good idea to repay any overdraft borrowing as soon as you realistically can, especially if you are being charged interest on it. An interest-free overdraft is handy to have in emergencies - but if that facility was taken away, or the provider started charging interest, it could put you in a difficult financial situation in the future.

Suggestions for dealing with debt

Debt consolidation is one route you could consider, but only if you know you can commit to making repayments and you're comfortable with the amount of interest you'll pay overall. This is particularly important when considering a debt consolidation mortgage - as your home could be at risk of repossession if you don't make the repayments.

Once you have looked at each debt, you need to think about what to do with your 'spare' cash (after you've already met your financial commitments) every month.

You could consider overpaying your higher-interest debts first of all - as a high interest rate can cost you a lot more in the long run. Or you might decide to focus on clearing your smaller debts first, so you really feel like you're getting somewhere (which can help you stay motivated and keep overpaying your debts).

Finally, if you can't afford your repayments, you could look into a debt repayment plan and ask your lenders to consider freezing your interest and charges. There are professionals who can help you to do this.

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