Debt is a common problem in modern society, and often for young people. Our educational system with tuition fees and student loans positively encourages people to get into debt. Such are the costs of further education, that people are leaving college or university with average debts of over £20,000. That is a huge amount of debt with which to embark on the road of adulthood; it is no wonder that so many people get into trouble.

For a period of time a large number of students were declaring themselves bankrupt in order to write off their student loans. Once the government saw what was happening they stopped it by excluding student loans from bankruptcy proceedings.

The first step in managing debt is to examine the balance between the cash coming in and the cash going out. It is necessary to monitor this accurately over a period of time in order to identify where the ship is holed. This is the most difficult part really; once you have faced up to the shock that you will experience during this process, all else will seem like plain sailing.

Can you increase the inflow? It is likely that you will resent cutting your expenditure; after all we only have one life and we should enjoy it. Rather than cut down on things, it is best if we can increase the amount of money we have to spend on them – perhaps we can get paid for doing overtime, take on an extra job, or better still negotiate a pay rise. There are always ways to make extra money if you have the will to do so, but sometimes even this is not enough to take you out of debt in a reasonable time frame.

So, armed with your new knowledge of your cash flow situation you need to make an assessment of the amount of money you can afford in order to repay your debts. You then need to persuade your creditors to accept this level of payment and to preferably stop charging you interest and late payment fees. That might sound difficult, but it is easier than you think, especially with a little professional help. If you are still stuck then you may employ the help of a debt management company.

Debt management can be the answer if it is serious but is not always the only

Look at ways to increase your income, take another part time job if you have to get your of the rut. There are numerous freelance websites available, with copywriting, data entry and other ‘work from home’ type jobs available. Alternatively, look in your local newspaper or on online job boards to see if you could get a few hours extra work per week – the money quickly adds up.

Two, make a get out of debt plan and find out where you can get the cheapest borrowing compared with what you have already got. Change credit cards, loans, mortgages etc if you have to. Find the cheapest APR possible. This is easily achieved with all the money comparison sites out there now. By saving a few % here and there you could cut hundreds off your yearly bills in an instant!

Three, consider an IVA. I’m not exactly sure how these work, but there are adverts for them everywhere and it would seem to be an alternative. From what I can gather is that you make a voluntary agreement to pay off your debts but don’t have to pay all of it based on the principle they would get nothing in the event of bankruptcy. Usually, these are for people in severe levels of personal debt.

Here are some of the common spending habits.  See if you can identify with it:

1. Spending more than what you earn.

How is this possible? Does borrowing money from others, breaking your piggy bank, and making use of credit sound familiar to you?  Be careful with this habit because although it may seem harmless now, it can take its toll on you in the future.  Soon you might drain your savings, max out your credit cards, and your loans may be denied.

2. Spending money you don’t even possess.

Normally, spending habit number 1 is made possible by spending habit number 2. Credit cards and loans make it possible for you to spend money you don’t have. When you make use of your credits cards and money taken from loans to buy stuff and pay your bills, you are generating debt.  Every month that you are unable to repay your debt, it will keep on growing and growing.

3. Using credit for everyday acquisitions.

You should arm yourself with cash when you’re making ordinary purchases.  Examples of which are groceries, gasoline, and clothes.  The use of credit cards is appealing because of the ability to delay payment for things that you can already enjoy now. The drawback is that you’re less likely to pay your bill for items you’ve already utilized.  Consequently, making use of credit instead of cash is an alarming habit, particularly when you don’t pay your bills in full every month.

4. Making use of credit when you have cash on hand.

This is one of the fastest ways to get into debt.  People feel that they are getting something out of nothing by making use of their credit cards.  This is bad because in reality, if you don’t want to pay for your goods today, you definitely will not feel like paying for it tomorrow.

5. Paying debt with another debt.

Using credit cards to pay your other cards just jumbles up your debt. You are not actually paying off anything. As a result, you incur more debt each time.  What people are not aware of is that there are fees to be paid for paying off debt with another debt. Ultimately, you will be in a bigger mess than when you started.

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If you’ve already been late on a lot of payments, your lender may have even sent you a letter offering a huge reduction in the balance if you pay it in full. These discounts usually range from 30 to 60 percent of the total amount of your current balance.

The reason that most lenders are willing to take a loss is because they realize that bankruptcy might be your only other alternative. And, if you have no choice but to file bankruptcy, they won’t get any of the money. For this reason, most lenders will negotiate a lower payoff amount.

The only problem with getting a reduction on the balance is that it will lower your credit rating. But, if you need the lowest possible payments on a consolidation loan, a balance reduction might be your only choice. It will make a huge difference in the amount you need to borrow and reduce both your payments and interest on the new loan.