1. Face the facts
It's easy to ignore a bad financial situation but if the letters from creditors are piling up or you find yourself constantly worrying about paying the next bill, it may be time to stop and take stock. Make a list of all the debts in your name and identify those that need immediate attention such as mortgage or rent arrears. It is important to identify priority debts -- such as those related to medical costs or your home -- and deal with those first, leaving other debts like overdrafts or personal loans to be sorted out later.
2. Draw up a budget
You should first decide if you want to draw up a weekly or a monthly budget. Then list your income, from all sources, followed by your outgoings including costs such as rent or mortgage repayments, your weekly shopping bill, and regular bills such as electricity, gas and telephone. This should help you to get a handle on how much money you can spare to deal with sorting your debt problem.
3. Contact your lenders
Get in touch to discuss the debt, preferably in writing. Options that may be available to you include debt consolidation, payment breaks or extending the term of your loan. Credit card debt is notoriously expensive while running up an overdraft can also prove costly so it may be worth considering taking out a personal loan, at a lower rate of interest, to replace these debts.
4. Snowball or avalanche?
Depending on how serious a situation you find yourself in and your personality type, it may be worth considering the "snowball" method of debt repayment. This involves paying off debts in order from smallest to largest. The satisfaction of clearing your debts, one by one, may help to keep you motivated. In contrast, the debt avalanche approach prioritises high-interest debt by allocating enough money to make the minimum payment on each debt, then devoting any remaining funds to paying down the loans with the highest interest rate.
5. Get help
If it all seems too daunting, help is at hand. The Money Advice and Budgeting Service or MABS is the state’s money advice service and has helped people to deal with debt problems for more than 20 years. It provides both a telephone helpline as well as online resources while a face-to-face service is available at its 60 locations countrywide. Free independent and impartial advice is also available from Stepchange Debt Charity Ireland which runs a telephone advisory service for struggling debtors. The Insolvency Service of Ireland, a government body, also offer help on its website www.backontrack.ie.