Paul Day, expert debt adviser at caba, offers six top tips on managing debt
A report suggests that around 42% of accountants and students are struggling financially. This can be attributed to the ongoing cost of living crisis. The effects are quite alarming- of these accountants, 59% feel stressed and 34% are depressed.
Research from caba shows that accountants are often reluctant to discuss their financial worries due to the nature of their jobs. They are restricted by their belief that all accountants should be on top of their own finances. In such situations, budgeting and finding solutions to tackle debt may be challenging. There is also the notion of feeling like the only one dealing with a problem of this magnitude. These fears are some of the factors that prevent them from opening up to others.
The most important thing to remember is that you are not alone. There is always help available.
In this article, I will provide some initial considerations for anyone facing debt. Further information and guidance can be found on our personal finance hub where you will find a host of helpful articles and free-to-use tools.
Good debt vs bad debt
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There are numerous things that you can do to take back control of your personal finances. The first is to build your understanding of the different kinds of debt. Not all debt is a bad thing. Credit and borrowing are important for any functioning economy, and ensuring you make all your payments on time can help to improve your credit score.
‘Bad’, or ‘unhealthy’ debt, is when you have accumulated a level of debt that is considered excessive or unsustainable. For example, suppose you are borrowing money to cover basic living expenses such as rent or groceries or run up a credit card bill with no clear repayment plan. In that case, this may indicate that you have got ‘bad’ debt.
However, in every case ‘good’ and ‘bad’ debt are completely personal to you and your financial journey. Remember, your debt should work for you, not burden you.
The importance of reaching out
As the adage goes, a problem shared is a problem halved. If you have noticed you have a debt problem or are experiencing any signs of financial stress, it can help to reach out to an expert or a loved one for support. Speaking to someone you trust can remind you that you are not alone and can help you explore and articulate your different options.
At caba, our experts can support you in several ways. We have multiple self-help guides online, including a debt toolkit that is free for anyone. If you’re an ICAEW member or ACA student we also offer free mental health support and debt advice, and can even negotiate with creditors on your behalf.
Importance of Budgeting
Budgeting is your best way out of debt.
You can start creating a budget by keeping things relatively simple. Track your expenses using a money management app or write them down to be aware of your expenditures. You can list your income sources and your outgoing expenses. When you do this consistently, you’ll quickly see where and how you can redirect money towards decreasing your debt.
What’s more, it can help you to notice important trends in your spending and identify areas where you can cut back. Remember, reducing your debt requires sacrifices and making tough calls.
Drawing a budget of this type will help you develop a financial plan. You can also reach out to a financial wellbeing expert who can assist in figuring out your financial position.
Managing your finances with debt can be an overwhelming undertaking but it’s entirely possible when you have a plan. What’s more, you don’t need to have all the answers yourself. There is so much useful guidance out there, along with experts who’ll help you make sense of it. All you have to do is take that first step.
Quick tips and tricks to navigate debt:
- Be honest with yourself. Ask yourself some straightforward, but potentially difficult, questions, including: How much money do I owe in total? Do I have a plan?
- Ask for help – it will lighten the emotional burden you’re carrying and remind you that you’re not alone.
- Put yourself first. Your mental health is more important than a bank or creditor.
- Pay off your debts before saving money.
- Don’t compare your situation to others.
- Take your debt seriously – don’t give in to social temptations and make sure you’re sticking to your repayment plan.