4 steps for fighting debt denial
By Marianne Curphey
If you have ever avoided opening a bill, or you try not to think about the money you owe on your credit card, you are not alone.
Equifax recently reported that many UK cardholders suffer from debt denial. Nearly a third of those who don't pay off their credit cards each month don't know their current outstanding balance. Even worse: More than half don't know what interest rate they're paying.
Sound familiar? Here's our 4-point plan for getting out of debt denial and on your way to financial accountability.
- Think positive
Stop thinking of yourself as a victim and start taking responsibility for managing your money, says Becky Wright, a counsellor at New Leaf Counselling and Coaching. "If you have self-limiting beliefs such as 'I am no good with money,' they become self-fulfilling," Wright says.
Instead, start thinking about money as the key to freedom, rather than a chore that you have to deal with.
"Don't think of it as budgeting, think of it as a spending plan to set yourself free," says financial life planner Simonne Gnessen of Wise Monkey Financial Coaching. "Our focus tends to go on the problem rather than the solution. Imagine a life that is debt-free, and that will inspire you to take action."
- Give yourself goals
Change your mind-set from "I can't handle my debts" to "I will pay off my debts," Wright recommends.
"Many people stifle their dreams and therefore don't have the inspiration they need to envisage a future where they are wealthy and successful," Wright says.
The most important part: the numbers. When do you want to be debt free, and how much will you have to pay each week or month to make it there? Gnessen recommends describing your deadline in inspirational terms (like "financial freedom day"), writing it down and documenting your progress.
- Pin-point your money blocks
The problems we have with money often come from unconscious beliefs we carry around with us, says Wright.
"Sometimes they come from childhood," Wright says. "If you have grown up in a family where debt is commonplace then that might seem normal to you."
For example, if your parents ignored their bills and never talked to you about handling money responsibly, it might mean that you'll be uncomfortable tackling debt in your adult life.
- Ask for help
If you've denied your debt for a long time, you may not be able to manage it on your own. Asking for help can be difficult if you've grown accustomed to ignoring your money problems. Yet a credit counsellor -- or even your creditors -- might be able to assist you.
Contact your creditors to see if they are willing to negotiate. Explain your financial situation, calculate how much you can afford to repay each month and propose a payment plan.
If your creditors won't work with you, there are a variety of free debt advice services to choose from. If you're not comfortable meeting a credit counsellor face to face, the free online Debt Remedy service from the Consumer Credit Counselling Service will give you anonymous advice based on your situation. You'll come away with a personal budget showing your income and outgoings and practical help to make the most of your money.
"This is a great online service that you could use anytime," Gnessen says. "So if you wake up in a cold sweat at 3 a.m. worrying about debt, you can go online and take positive action to sort it out."
Published: 9 August 2012
- Avoiding credit-builder card pitfalls – You may have heard advice to take out a "credit-building card" if you have a low credit score. However, if you don't spend and pay responsibly, such cards can further ruin your score ...
- How to turn a 'credit detox' into long-term healthy habits – It takes a few months of good behaviour to make any noticeable improvements to your score. So, many go on a "detox" before applying for products. But you're better off turning the detox into healthy, long-term habits ...
- Rebuild your score with a credit-building card – A poor credit record can harm your chances of getting financial products in the future. Fortunately, you can rebuild your score. In addition to good payment behaviour, you can apply for a credit builder card to gradually repair your score ...