Just deal with it!
Debt can be like an ant infestation. At first you just spot one or two; you ignore it, hoping the problem will go away, but before long, the problem escalates and can become uncontrollable.
So with ants, recognising you have a problem means you are half way to solving it and the same rings true for debt. Debt is a reality of the modern world — you need an education, you need a car, you need a holiday and all of these cost money.
Debt is often a necessary and useful tool — most of us couldn't afford a house or a car without it, but the problem arises when that debt isn't managed properly.
The first rule is communication. Don't lie to yourself or to the companies you owe money to. Talk to your bank, talk to your friends and family. Call the credit card company and explain the problem you're having. Ask if they could assist you with a short-term solution such as temporarily lowering your interest rate or extending your payment deadline.
Acceptance
Your bank is much more likely to be sympathetic if you actually go in and discuss the problem rather than burying your head in the sand.
Lloyds TSB has dedicated relationship managers to handle the needs of both personal banking and commercial banking customers. These people have been specially trained to help customers get back on the financial track.
The second rule is budgeting. The best way to start reducing debt is to set up a budget. It's not a punishment; it's a way of knowing exactly where your money goes. You'll need to add up your income and subtract your expenses, then set up a plan.
Be honest about your spending habits and you'll end up with a more realistic budget. Budget more than the minimum you need to pay per month. Paying the minimum is better than nothing, but you will wind up paying more in interest as you chip away at the balances.
The debts that you need to tackle first are the ones that have the most serious consequences if you miss a payment. For example, rent and car payments, if you bought a car using a loan the vehicle can be taken away if you do not meet your repayment schedule.
Prioritise other debts. For example, credit cards, overdrafts and loans starting with those that have the highest interest rates. This means that although you cannot have things taken away from you, they can still be expensive due to interest payments and late payment fees.
Emergency fund
Start an emergency fund. This is a savings account that should grow to at least three months of expenses. Even Dh50 a week can help if it means you don't have to borrow again in two months time. Without an emergency fund, unexpected costs or loss of income can drive you deeper into debt.
To find out what's draining your finances, keep a money diary. Track where your money goes for a month. This will reveal whether you're spending too much on non-essentials like eating out or too many spa treatments!
Nobody really wants to be in debt. But once you have sat down and tackled the issues the sense of relief is enormous and totally worth it. Just remember, once the ants have gone it doesn't mean they can't come back. Keep your finances and your home clean and tidy and you will remain ant-free for good.
Finally, in the case of an ant infestation, Lloyds TSB Middle East recommends speaking to a qualified pest control expert.
The writer is Head of Personal Banking for Lloyds TSB Middle East. Opinions expressed here are his own and do not reflect the view of Gulf News.
