Managing your debt
If you’re falling behind with your bills or struggling with credit card debts, it can get pretty over-whelming.
Definitely don’t ignore it in the hope that they’ll magically disappear, but don’t panic either. It’s just time to take stock and make some logical decisions about what to do next.
Step 1: Make a list and prioritise
Make a list of all the money that you owe in credit debts and general bills, both the regular payments and the once-off stuff. Then divide the list up into ‘priority’ debts and ‘non-priority’ debts.
Priority debts are the ones that you have to pay in order to keep yourself out of trouble, to keep a roof over your head, keep the lights on and make sure you don’t get fined. They include:
- Your rent
- Your utility bills (electricity, gas – things that could be cut off)
- Anything important you bought on hire-purchase, like a car (it could be repossessed)
- Any fines you owe– parking tickets, LUAS fines, court-ordered fines (if you don’t pay these or do something about them, you can end up owing more money or going to jail)
Non-priority debts are slightly less urgent and can be negotiated or put on hold. They include:
- Credit card bills
- Money borrowed from friends or family
Your priority debts are the ones you need to address first. Next, you need to work out how much money you have and what you can afford to pay.
Step 2: Work out your budget and pay for priorities
Work out exactly what your total income is. Then add up your necessary living expenses and priority debts.
For example, if you have an income of 1,000 euro a month, add up your rent, food, utilities and any urgent fines and take the total away from 1,000 EUR. Whatever’s left is your available income.
See budgeting for details on how to make a budget and cut down on your expenses. If you can, pay/set aside money for your priority debts. Your available income can then be used toward your non-priority debts.
Step 3: Make plans for your non-priority debts
Non-priority debt like loans, credit card bills and overdrafts can usually be negotiated with the creditor (bank/credit union) to fit around what you’re able to pay and when.
The important thing is that you contact them and let them know what’s going on.
It’s good to keep everything in writing so you have a record of all your conversations with the creditor. Write a letter explaining your financial situation, what you can now afford to repay and when.
There’s some good tips for doing this and a sample letter on the Money Advice and Budgeting Service (MABS) site, or you can call the MABS helpline on 1890 283438.
If you don’t make an arrangement for paying back these debts, the case can end up in court, but don’t be too scared of that.
It’s not the best prospect in the world but the courts can often make a deal with the creditor on your behalf once they see all your financial details.
Most importantly, remember to stay calm and be polite in all dealings with creditors. They can only get their money if they make an arrangement with you.
Don’t let them put too much pressure on you, but it’s good to stay in their good books for the future. It’s a good idea to reassure them that you will inform them if your circumstances change and you can afford bigger repayments.
If your budget won’t stretch
If you find yourself in a situation where your income is not enough to pay your priority debts, again don’t panic. Here are three initial steps you can take:
1. Ask for help
This is a really tough thing to go through on your own so don’t be afraid to ask for help and advice. Contact MABS online or on their helpline 1890 283438. That’s exactly what they’re there for.
Talk to your family if you can, your friends (who might have had similar problems) or a counsellor if you find yourself feeling over-whelmed or anxious about your money worries.
These problems can be resolved. It’s definitely not the end of the world, and even small steps make a positive difference. The important thing is to be honest with others and yourself about the extent of the problem.
2. Examine your outgoings
Look at your costs and see where you can reduce them. If you’re renting an apartment, could you move somewhere cheaper?
Hard as it is, do you need to move home if that’s possible? Could you change your electricity provider? Could you shop more sensibly and cut down on extras?
None of these steps are necessarily answers in themselves and they might not apply to you, but it’s a good thing to examine.
3. Maximise your income
Look at whether or not you are receiving all of the benefits/social assistance you are entitled to. You might be eligible for rent allowance, for example, which could ease the financial pressures.
Have a look at www.citizensinformation.ie for information on the different allowances that you might be entitled to.
Also, is it possible for you to earn extra cash in any way? This is not always a possibility but don’t rule it out. Think about the skills and the time you have, and see if there’s any part-time or occasional work that might fit in.
What not to do
It’s usually not the best plan to borrow more money to pay existing debts. There are a lot of debt management companies who will offer to consolidate your debt into one ‘manageable monthly payment ‘ (ring any bells?), but the charges and interest on these loans can be huge. You can end up owing more money.
Short term loans that are advertised on TV have very high interest rates, especially if you don’t pay them back on time.
- Don’t borrow money from creditors who you don’t trust (i.e. loan sharks) as you can end up putting yourself at risk.
- Don’t lose your temper when you’re communicating with the bank or anyone you owe money to. Stay calm, keep in touch with them and be open about what you can afford.
- Don’t ignore the debts. They won’t go away that way. They will go away eventually if you deal with them.
If you are worried or anxious
Debt can seem like a really scary thing, and it can often get people down or make them very anxious. If you’re feeling worried or depressed by financial concerns, talk to someone about it.
There are people that can help, and people who can just listen.
Money Advice and Budgeting Service can help you make a plan and give you loads of information about your rights. You can call them on 1890 283438.
www.citizensinformation.ie has information on a range of issues, services and entitlements.
Samaritans Ireland are a confidential and non-judgemental support for anyone in distress. They run 24 hour phone and email support and will always be there to listen and help. Contact them for free on 116 123 or email firstname.lastname@example.org.