Understanding Debt Management Plans

With more and people battling with debt in the UK these days, it is important to know what solutions are available. A debt management plan isn’t for everyone but it can provide people with a solution to serious debt issues. No matter what your current financial status is, it is vital that you take steps to be on top of your finances and understand your situation.

The most important step to take when it comes to obtaining a debt management plan is to draw up a budget. In fact, no matter what you are looking to do with your finances, you’ll find that obtaining a budget makes sense. You need to be certain about your income and if you are not sure of where to begin when it comes to drawing up a budget, you’ll find that there is plenty of support on offer. You should always look to speak to an expert or use online budget tools to make sure you account for what is going in and out or your bank account.

It is also vital that you are honest with yourself when drawing up a budget. There is no point in overlooking certain aspects of your expenditure or writing some things off in the hope that it will provide you with a more attractive figure. This may look better but if it is not an accurate reflection of your finances, you are only going to cause yourself more trouble in the long run. This is why you need to be honest about your finances.

What to include in your budget?

You need to include all of the income that comes into your home. If you live by yourself, you should include all of your wages, any other benefits or income that provides you with money. If you live with a partner or you are married and the other person brings money into the home, this should be considered as well. This includes all benefits, money from second jobs and other regular income that you receive. If you live in a flat or home with people who are you not in a financial relationship with, their income should not be included in your budget.

After you have calculated all the money that you receive, you need to consider the money that you spend. This will include:

  • Rent or Mortgage payments
  • Utility bills
  • Telephone bills
  • TV and mobile phone bills
  • Travel expenses
  • Food and drink

These are all essential bills that have to be paid, so you can see how your expenditure can quickly add up. There is also the fact that many people will regularly spend money on entertainment, fitness, clothes and other options, and you should have this in mind if you regularly spend money. These are non-essential items and they should be the first items of expenditure you should look to remove from your monthly spending if you do not have enough money.

Self-employed people should create a different plan

With more and more people operating as self-employed professionals these days, it is important they realise that they need to act differently when it comes to a debt management plan. People who are self-employed will have to carry out a business and household budget sheet. This will see them consider their personal finance options but also the ins and outs of their business. When you think about the close links between the personal finances and business finances of a self-employed person, this makes sense.

Interest isn’t always frozen with a debt management plan

Another issue that is important to be aware of is the fact that creditors are not obliged to freeze interest when a debt management plan is being used. This may be something that the debt management company operating on your behalf will be able to persuade the creditor to agree upon, but this isn’t guaranteed. This may impact on what you can afford to pay so before you agree to any plan, make sure you fully understand the terms and conditions associated with the plan.

Given that the level of debt in the UK is expected to rise, with more people being affected by the issue, it is vital that people fully understand debt and learn what they can do to minimise the risks they face.

Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.


Understanding Debt Management Plans 3.33 (66.67%) 3 votes

September 17, 2016

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