Steps to take when dealing with financial difficulties

In this day and age, with credit conditions, the cost of living, and below inflation pay rises, all taking their toll on consumers finances, most people are only too well aware of how difficult it can be to keep on top of financial commitments.

For those of us that have mortgages, debts, bills, and other financial commitments to cope with the strain can become unbearable, and at some point you may find that you reach a point where you simply cannot cope with your financial obligations any longer, and you need to take steps to sort out your situation.

The steps that you need to take will depend on the cause of the difficulties. For example, you may find that you are struggling with your financial commitments even though you have no debts, simply because of below inflation pay rises as opposed to high food, petrol, and energy prices.

On the other hand you may find that your financial problems stem from the large amount of debt that you are in such as credit cards, loans, store cards, and the like.

If you have little to no debt but you are still struggling to make ends meet each month then you need to take a good, long hard at your budget and see where you can make cutbacks. This could mean cutting back on going out, entertainment, clothes, and any other non essential spending.

If you smoke then this may be the perfect time to kick the habit and save yourself a fortune- with smoking now banned in pubs, clubs, and eateries, there has never been a better time to kick the habit, particularly given the cost of cigarettes these days.

If you look at your budget and there is nowhere that you can make cutbacks, then you may want to consider getting a second job and bringing in some extra income for a while, as this could help to sort out some of your financial problems.

Another option if you are a homeowner could be to consider taking in a lodger – many people are now looking to rent accommodation due to the problems in the housing and mortgage markets, so you could find that this is the perfect opportunity to rent out your extra space and bring in some much needed income.

If you do have unsecured debts that are contributing to your financial problems then there are also a number of steps that you can take to try and ease the situation. The first thing you should do is contact a debt counselling agency or debt management agency, and go through your income and outgoings with them.

Of course, we all struggle with finances from time to time, but if this is becoming a regular problem then it is time to do something about it.

A debt management agency or counsellor will be able to advise if you qualify for a debt management plan, and this is where you pay a set amount to the debt case officer or agency each month and this amount is distributed between the various creditors on a pro rata basis.

You will need to meet certain criteria in terms of how much you earn, how much you owe, and your employment status, but if you do qualify you could see your monthly outgoings slashed considerably.

With this sort of plan you will continue to make the lower repayments until either your situation changes for the better, in which case you may be able to come out of the plan and revert back to your original repayments, or until the debts have been paid off.

However, if you are pretty organised then you may find that you can arrange lower repayments directly by contacting your creditors yourself in writing. Most are sympathetic about financial difficulties, and you will fare much better by contacting them and explaining the situation in order to get your repayments modified than simply waiting until you cannot cope any longer and then missing repayments altogether.

There are other solutions available for those with debt problems, such as IVA or even bankruptcy, but you need to bear in mind that the after effects of these actions can be long lasting and can affect your financial future for years to come.

If you feel that your financial problems are temporary then it is probably worth speaking to your creditors to see whether you can get your repayments reduced on a temporary basis, after which time the situation can be reviewed or you can simply revert back to the original repayment.

Another option is to consolidate your unsecured loans using one single secured or unsecured consolidation loan depending on your circumstances. This could also help to reduce your outgoings but will have no adverse effect on your credit.