While household debt levels in the UK may have grown at a slightly slower rate in 2018, they continue to increase and pose a significant challenge to the wider economy.
The amount owed by households to banks, credit firms and lenders increased by an average total of £886 during the last 12 months, for example, while the rate of unsecured debt across the UK has soared by a staggering 50% since the 2008 economic crash.
With this in mind, it’s absolutely imperative that we adopt a proactive approach to managing our finances and minimizing the burden of debt over time. Here are a number of strategies that can help you to achieve this objective.
1. Start Budgeting
If you’re struggling with debt, your first step should be to start budgeting and understand the precise amount of income that you have at your disposal every single month.
This requires you to calculate both your incomings and outgoings accurately and in detail, before using this information to determine precisely how much of your monthly income can be classed as disposable.
This sum can then be used according to your precise financial objectives, whether you need to commit more to repay existing debts or increase the amount invested into a savings account.
There are also several mobile apps that can help you to budget more effectively going forward, some of which enable you to integrate bill payments and bank accounts into a single interface.
2. Reduce your Bills (or Debt) and Monthly Expenditure
From a practical perspective, the next step is to focus on reducing your expenditure where possible in order to increase your disposable income over time.
You should start by reviewing your outgoings in closer detail, paying particular attention to subscriptions that are non-essential and can be either reduced or canceled immediately. You should also strive to reduce your utility bills and grocery costs where possible while comparing the market for more competitive mobile phone and broadband deals online.
We’d also recommend opening a basic bank account through a provider like Thinkmoney, which will enable you to control your monthly spending and operate fully within your financial means.
As a result, you can cap your spending each month and ensure that your income stretches further throughout the course of the financial year.
3. Create a Monthly Meal Plan
One of the biggest and most unavoidable monthly expenses is food and drink, while we often fail to help ourselves by regularly eating out and ordering in takeaways. There’s nothing wrong with treating yourself, of course, but we often eat in this way because of a failure to plan meals or a lack of fresh ingredients in the house!
By creating an achievable monthly meal plan, however, you can negate the need to eat out regularly and save considerable sums of money in the process.
Similarly, meal planning allows you to plan your shop and buy items in bulk, reducing the cost of your groceries over the course of each calendar month. This type of focus and organization is crucial if you’re to take charge of your finances and achieve financial security in the future.