Advice Hub

June 5, 2011

Debt and Budgeting

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Written by: Kyle Raffo
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For many of us, student debt is unavoidable; whether it be through the cost of living away from home, tuition fee loans, bank loans or overdrafts. The most important thing to remember is that debt doesn’t have to be stressfull and make you worry; if you manage your money in a sensible way and take action before things get out of hand, you can avoid getting into financial difficulty.

However for some, making monthly repayments to creditors as well as maintaining a good standard of living can be extremely difficult. When this is the case it’s important to remember that you are not alone; there are a number of specialist debt advice charities and Higher Education schemes that can quickly help you to get everything back under control.

How to Avoid Unmanageable Student Debt

The best way to manage your money is by setting out your monthly essential living costs (such things as food, travel costs and rent), your monthly payments (such as phone contracts) and your monthly income (such as wages from employment, student loan or grants). By subtracting your essential living costs and monthly repayments from your income, you end up with how much you have available each month to spend on non-essential items.

You can use this Free Budget Planner to help you manage your money:

Free Budget Planner

What Type of Debt Do I Have?

The first thing to decide is whether it is a debt problem or a money management problem that you have; A debt problem is when you cannot pay your creditors the contracted monthly amounts and have enough left over to cover essential living costs.

A money management problem is where your total income can cover both your credit repayments and your essential living costs but you spend too much on non-essential items.

Money Management Advice

If the answer to the above question is that you do have enough money left over at the end of each month to pay your creditors howevrt you still struggle then you need to look at simple ways to reduce your non-essential spending or increasing your income.

Ways to reduce your non-essential spending:

Benefit entitlement – Make sure that you’re claiming all of your student benefit entitlements.

Money saving websites – Money saving websitescan help you reduce living costs

Avoid impulse purchasing – Make a list of items you need before setting out to the shops.

Ways to increase your income:

Employment – Work flexible hours that won’t interfere with your studies.

Sponsership – Student sponsorship is also available across a wide range of courses

Benifits – Check your benefit entitlements, such as Housing Benefit and Income Support

Debt Advice

If you cannot meet your credit commitments that you are contracted to then you are technically insolvent.

The first thing to do is to check you are receiving all the benefits that you are entitled too and also consider if you are spending excessively on non-essential items. If you have addressed both of these areas yet you still cannot meet your commitments then the next step is to try to reduce your monthly payments to an amount you can afford.

If you feel that you are able to negotiate an informal managed arrangement with your creditors yourself then you can use this free online debt analyser tool.

It’s also always a good idea to seek independent advice from a specialist debt advisor who can take you through all of the options that are available to you.

Finally, you should always try to pay your priority debt such as rent/mortgage, Council Tax, TV license and, CCJs before unsecured debts. This is because failure to maintain priority debt repayments has much more severe consequences than failure to maintain unsecured debts repayments.




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