Woody Allen said, “Money is better than poverty, if only for financial reasons.” Nevertheless, money brings with it a great deal of stress for nearly everyone. The panic we sometimes feel about money issues can prevent us from addressing the problem and result in things getting worse.

Debt and the difficulties of balancing our budget affect most of us these days. The costs of being a student, buying a house, plus hundreds of everyday expenses, together with the ease of getting a loan, can add up to a big headache. But it is possible to remove the fear and confusion and get on top of the situation.

Questions to ask yourself:

  1. How much money do you have in savings and investments?
  2. How much money do you owe, including student loans and mortgage?
  3. Are you only paying off the minimum charge on your debts each month?
  4. Do you know what direct debits and other automatic payments you are making?
  5. What is the minimum amount you need to live on each month?
  6. How much of your income is left for paying off debts or saving?
  7. What do you need to be saving up for? (Christmas, birthdays, holidays, etc)
  8. How much do you spend on unnecessary items every day? If you’re not sure where your money goes, keep a spending diary for a week or month, and you’ll probably be surprised.

The answers will help you get a grip on your situation and highlight any problems you may be facing.

Next, sit down with a clean sheet of paper and try to come up with possible solutions—for example, canceling unnecessary automatic payments, taking sandwiches to work instead of buying lunch, or opening a separate savings account.

Be in Control

Don’t ignore the big financial problems — they won’t go away by themselves. Be brave and open all bank and store card statements. Attempt to break the impulse-buying habit if it is a problem for you — try giving yourself a spending allowance or paying with cash to make you think twice. Remember you’ll appreciate things all the more if you’ve saved up for them.

Cut out luxuries if necessary, but also see whether you can go further. You will need to be ruthless, but the quicker you clear your debts, the better. If you have leased items, such as furniture or a car, and have made the payments, return the items, since if you are up to date with your payments, you will not owe any more money.

However, money management isn’t just about spending less. Think about whether you are getting the salary you deserve. Consider asking for a raise at work, or think creatively about other ways you could increase your income.

Debt

Uncontrolled debts are a worry, no matter how hard you try not to think about them. But putting off addressing them costs you money in interest and charges while robbing you of your peace of mind. So decide that you are going to face them head-on and take action sooner rather than later.

  • Make a list of your debts, and the amount of interest you’re being charged on each one (be brave, this could get depressing).
  • Prioritize paying off those debts with the highest interest rates, and move all you can to a zero-percent interest credit card. Be aware that this rate probably won’t last forever.
  • Keep one or two credit cards and cut up the rest.
  • Set realistic goals for paying off debts and starting to save.
  • Beware of the lure of Internet shopping.
  • Think about increasing your hours at work, selling some valuables, or renting out the spare room.
  • There are plenty of sources of good, expert, and free advice, so take advantage of the help that is available.

Money Do’s and Don’ts

Do

Draw up a budget and stick to it. Keep your creditors informed in advance of any changes to your repayments. Get advice: There are a number of places which offer help before, during, or after you get into difficulties. Many of these services are free.

Don’t

  • Don’t borrow money at high rates of interest to clear debts that you cannot afford.
  • Don’t draw up an unrealistic budget.
  • Don’t bury your head in the sand when you receive utility or credit card bills; you may damage your credit rating.
  • Don’t turn to unhealthy coping behaviors to numb your anxiety, such as drinking, smoking, or overeating. This will only lead to more stress.

References and other resources

Moneysavingexpert.com (heavily UK)

Tips for Solving Money Problems

Budget-making tool

Money101