Debt. It’s something we all have and it’s definitely something we’d all like to get rid of. It’s fair to say that for most of us, debt has become a way of life - and to an extent, that’s okay.
There is a point, however, when your debt is becoming… well… not okay. If you find yourself worrying excessively about the debt you have or struggling to meet minimum payments, that’s usually the point at which you ask for help.
Unfortunately, with debt, there is no magic bullet. Fixing the problem tends to take a lot of work and patience, as you gradually try to summit the mountain and then find your way back down again. In the process of doing this, you might have to ask yourself the unthinkable: is your debt something you can really deal with?
Self-Delusion versus Debt
We’re all constantly told that if we just manage our spending and make our payments, debt is an acceptable choice, that it’s something we can get out of. Even if you realise you’re stretched too thin with your financial obligations, nine times out of ten it will still be treated as something you can solve. All you need is a budget, to negotiate with creditors, and all the other advice you’ve heard a thousand times, and it’ll be fixed.
However, sometimes, the situation can have become so severe that there’s no easy way out of it. It might be that the total of what you owe is so high it would take decades to pay it back, or you can no longer meet your obligations due to a change in your income - either way, no amount of sound money management is going to help.
Facing The Reality
You have to ask yourself three questions when it comes to the debt you face:
- Do I have the funds to pay this back? You have to be sure you’re earning enough to be able to live (frugally if necessary) and still make significant dents into the total amount owed.
- Am I willing to accept how long it will take to pay this back? Remember, you’re signing up for the long haul here - it could be years until you can release the purse strings and return to normal.
- Do I have a plan to cover myself for expenses I used to use credit for? You need an emergency fund for all those unexpected expenses, such as a broken washing machine or an unexpected car repair, that you can rely on rather than credit.
Only if you can answer these questions in the affirmative is any kind of debt management going to be realistic. No one likes the idea of having to go down the route of contacting insolvency practitioners and examining the bankruptcy route, but sometimes, it’s the best choice.
A Fresh Start
If you are sure you are not going to run up debt again in the future, then insolvency might genuinely be the best option for you. Yes, it will restrict your access to credit for up to six years - but maybe you need that to help truly change your spending habits. At least with this route, you will be able to return to a new normal in a relatively short amount of time.
So be honest with yourself when you assess your finances. Choose the route that works for you, rather than an idealised one you would prefer. There’s no doubt the financial future of you and your family will be better off for it.