Daily Spends – A Diary of Spending Habits

Whichever newspaper you read and whoever you listen to, it seems that 2009 will be a tough year for Britain’s economy.

With that in mind, it’s important that you take care of your finances and address any debts you may have to ensure that you’re in the best financial shape. Here we take a look at five things that could help you through the recession.

Make a budget

In many cases, you can make a real difference to your financial situation just by noting down where your money is going and making a budget.

Overspending as a result of not budgeting is an easy trap to fall into. You may think you have enough disposable income once your mortgage/rent and bills have been paid, but people often fail to account for nights out, groceries, and any unexpected costs that could crop up.

Nobody can plan their finances 100% accurately, but by putting aside a rough amount for all your main expenses at the start of each month, it’s less likely that you’ll end up overspending.

Speak to your lenders

If you still find yourself unable to manage your debts, then it’s important that you speak to your lenders to discuss your situation. Your lenders may be willing to accept an alternative payment plan or a short repayment holiday in order to help you get back on track.

Of course, there may be situations in which you can’t come to an agreement with your lenders, in which case a more specific debt solution might be more appropriate.

Debt consolidation

A debt consolidation loan is a new loan that pays off your existing debts – effectively ‘consolidating’ several debts into one. This means you will only have to make one repayment each month, which can make managing your finances a lot simpler.

One of the main advantages of a debt consolidation loan is that by spreading out your repayments, you can reduce your monthly outgoings. However, be aware that you will pay more interest than if you had kept the shorter repayment period.

That said, it may still be possible to pay less interest overall if you are consolidating high-APR debts, such as credit cards. So long as your debt consolidation loan’s interest rate is lower than the average APR on your existing debts, you should be able to save money.

Before starting a debt management plan you should be sure that you can afford to make your new payments, and that you won’t risk getting into further debt by continuing your spending. If you are not sure, then another debt solution might be more appropriate.

Debt management plan

A debt management plan is an informal agreement between you and your lenders as to how you intend to repay your debts. It’s technically possible to arrange this on your own, but many choose to do it through a professional debt management company, who can negotiate with creditors and manage all transactions on your behalf.

If you do arrange the plan through a debt management company, you will usually make regular monthly payments to the company, who will distribute the money between your creditors accordingly.

IVA (Individual Voluntary Arrangement)

An IVA is a legally-binding agreement between you and your creditors, allowing you to avoid bankruptcy by agreeing to pay off a percentage of your debts over a set period of time, and write off the rest.

Before you enter an IVA, an Insolvency Practitioner will work with you to put together a proposal and send it to your creditors. For an IVA to go ahead, creditors accounting for at least 75% of your total debt must approve the proposal.

Once the IVA begins, you will make regular monthly payments to your Insolvency Practitioner, who will distribute the money between your creditors. This usually lasts for five years, and on successful completion your remaining unsecured debts will be considered written off.

If you’re a homeowner, you may be expected to release some of the equity in your home in the 54th month (half way through the final year) of your IVA.

Melanie from ThinkMoney.com very kindly wrote this article for me I thought it might be of interest to some of our readers. I hope you found it useful!

What makes debt management a good way of getting through a financial downturn? In a word: affordability. A well-thought-out debt management plan offers borrowers a chance to bring their expenditure back in line with their income – something that’s particularly important when the cost of living is on the rise.

In August, the official inflation rate (CPI – Consumer Prices Index) reached 4.7%. In other words, the cost of living is going up quite quickly: nowhere near as quickly as it was in 1975, when inflation hit 25%, but a lot faster than a year ago, when it was under 2%. It’s normal for things to get more expensive, but when prices rise faster than salaries, people simply have less money left over (disposable income) once they’ve paid their essential bills. For people already struggling to manage their debt repayments, any decrease in disposable income can have serious consequences.

This is where debt management can help: when someone finds they can’t keep up with their monthly debt payments, they may be able to re-negotiate those payments. Basically, there are two kinds of debt management.

There’s what some people call ‘DIY debt management’. A borrower can call their creditors, explain why they can’t afford to keep on paying as originally agreed, and see what the creditors suggest. They might, for instance, agree to accept lower payments, freeze interest or waive charges.

Many people with financial problems prefer to ask debt management experts to talk to creditors on their behalf. Professional debt management organisations, after all, should have much more experience in this kind of negotiation. They may have long-standing relationships with creditors, which could help them reach an agreement that reflects both the individual’s needs and the creditors’.

There’s no universal agreement on which kind of debt management plan is better. Some people want to handle the negotiations themselves, and see no need to talk to debt management professionals. Others are happy to get them involved, whether it’s because they’re not confident discussing finances with their creditors, or because they want help budgeting and drawing up a repayment plan that creditors are likely to accept.

Either way, it’s important to realise that creditors don’t have to agree to any changes. They’re free to consider legal action if they think that’s the best way of recovering their money. But if the individual obviously can’t keep up with payments as originally agreed, there’s a good chance creditors will decide it makes more sense to amend the repayment plan. This is the point of debt management – the individual can bring their repayments down an affordable level, and creditors get their money back (even if it’s more slowly) without resorting to legal action and/or debt collectors.

Read more about debt management and other debt solutions such as debt consolidation & IVAs at www.thinkmoney.com.

Directory > Debt Consolidation > Debt Advisers Direct
Debt Advisers Direct is a trading name of Freeman Jones Ltd a UK provider of debt consolidation, debt management & IVA services.

The site offers a comprehensive information base for consumers in debt with articles and advice covering various debt subjects.

The main services offered by the company are debt consolidation, debt management plans & IVAs. Consumers can request immediate debt help via a call back request>

Useful links:
Home: http://www.debtadvisersdirect.co.uk
Advice blog: http://www.debtadvisersdirect.co.uk/debt-consolidation-blog/
Debt consolidation: http://www.debtadvisersdirect.co.uk/debt-consolidation/debt-consolidation.asp
Debt management: http://www.debtadvisersdirect.co.uk/debt-management/debt-management.asp
IVAs: http://www.debtadvisersdirect.co.uk/iva-solutions/iva-solutions.asp

Directory > Debt Management > Gregory Pennington Ltd
This is the first addition to the new finance directory, and with no further a do, I’d like to include Gregory Pennington Ltd.

Established in 1993, Gregory Pennington provides debt management services to over 40,000 clients in the UK. As well as debt management, the company also provides debt help & advice services including debt consolidation, IVAs, bank accounts for people with bad credit and a range of remortgage services.

Gregory Pennington has long been regarded as one of the forerunners in the debt management industry and is a founding member of DEMSA (debt managers standards association).

Useful Links:
Home: http://www.gregorypennington.com
Debt Management: http://www.gregorypennington.com/debt-management.asp
Debt Consolidation: http://www.gregorypennington.com/debt-consolidation-loan.asp
IVAs: http://www.gregorypennington.com/individual-voluntary-arrangements.asp
Bank Accounts: http://www.gregorypennington.com/managed-bank-accounts.asp