7 Steps to Start Dealing with Debt

For more information on debt and links to useful resources, please see my post on debt and mental health.

  1. Face up to what you owe. Write down all your debts and how much you owe on each one. Add them up to give the total amount you owe. Try not to berate yourself or make excuses. Just accept the amount you owe.

 

  1. Enlist help. Debt can be scary and getting support makes the process of paying it back easier. Not easy, mind you, just easier. You can ask a partner, friend or family member for help or contact a debt charity (like Stepchange: www.stepchange.org) or Citizens Advice (www.citizensadvice.org.uk). It doesn’t matter who you choose, as long as it’s not one of those dodgy companies which charge you for advice: if you are paying, you are adding to your money problems, not solving them.

 

  1. Find out how much interest you are paying. You can find this information online, but try to find out direct from whoever you owe to ensure you know the correct amount for the products you have, especially if the interest rate is variable. Also find out about any early repayment fees. Contact your financial provider(s) directly if you are unsure of which products you own or your current rates of interest.

 

  1. See if you can lower the interest rates. It’s important to do your research here – ask a finance professional if you are unsure about anything. Sometimes you can transfer balances to another product or transfer several debts to a single product. NEVER go to one of those dodgy companies who offer to consolidate all your debts in return for a fee or higher interest rate. If you are uncertain about whether or not you will be better off, don’t do anything until you get advice from a finance professional – preferably someone independent. There are also procedures in place to help people with severe debt problems, so you might be able to reduce your interest by following these procedures – again, do your research and get advice from someone who knows their stuff.

 

  1. List the minimum payments. Find out how the minimum payment for each debt is worked out (for example, whether your credit card uses a certain percentage of the balance) and how much you need to pay each month.

 

  1. Budget. Find out how much of your income is left over after you subtract your minimum payments and essentials like rent and utilities. If there is nothing left over, contact a Citizens Advice or a debt charity (see above for links) who can help you.

 

  1. Pay the most expensive debt first. This isn’t your largest debt, but the debt which charges the highest interest. Pay off as much as you can afford each month while paying the minimum amount on all of your other debts. When your most expensive debt is paid off, you pay off the next most expensive and so on – this is called snowballing.

 

It’s critical that you don’t add to your debt when you are struggling with money problems. The best place to go (in my opinion) for general advice on controlling your finances is www.moneysavingexpert.com If you feel unable to do anything else, please follow steps 1 and 2. Debt is a common problem and there is no need for you to face it alone.

Dealing with Debt and Mental Health

Your mental health can affect your finances and your finances can affect your mental health. The specific effects vary, but common ones include feeling very anxious about financial matters, impulsive spending and losing control of finances during a period of depression. It makes sense when you think about it: if you are depressed, showering and cooking meals become massive challenges – paying bills on time has to take a backseat while you prioritise the bare essentials. Trouble is, you have to face your finances when you start feeling better and if they are a mess, it could make you feel worse again.

The good news is that there are some great resources for people with mental health problems and debt:

  • Money Saving Expert has produced a Mental Health & Debt guide that is supported by several mental health charities. It can be downloaded as a PDF at moneysavingexpert.com/credit-cards/mental-health-guide and contains loads of useful information. There is also a page of tips for people with bipolar, who may be prone to impulsive spending during manic phases. Unfortunately, there is no mention of borderline personality disorder – despite impulsive spending being a symptom of the condition.
  • Mind also have information on mental health and debt, including tools you can use to ascertain whether or not you have a problem at mind.org.uk/information-support/guides-to-support-and-services/debt-and-mental-health/ and details of where you can go for support. It also has a guide you can download.
  • stepchange.org is a UK debt charity which can help people with debt problems and also has a lot of articles and resources on debt and mental health.

It’s important to get any help and support you need as soon as you can. You can solve your money problems, but the longer you leave it before addressing the problems, the worse your problems will get – and the more impact they will have on your mental health. I know you might feel ashamed or embarrassed, but there are many understanding, supportive people who can help you. Debt is a common problem and there is no shame in admitting you have money problems. In fact, you deserve praise for finding the courage to face your debt.

My mental health has had a huge impact on my finances. I have had to leave jobs because of mental illness and decimated my meagre savings as I waited to receive benefits. Relying on benefits for several years has been difficult; the judgment I face from both government employees and society in general has made my depression and anxiety worse at various points. One of the symptoms of borderline personality disorder that I struggle with is impulsive spending. I took out a credit card to pay for my MA tuition (which was definitely worth it), but also bought a lot of expensive crap in attempts to make myself feel better (definitely not worth it) and ended up with over £6200 on my credit card. I also had a £2000 overdraft, which I have managed to reduce to £0. I also owe my parents several thousand pounds, because they have been forced to support me for most of my adult life.

I’m telling you this to demonstrate that I no longer feel ashamed of my debt. I am dealing with it and (slowly) paying it back. The process isn’t entirely linear: sometimes I mess up and buy a pair of shoes because I think it will make me happy. Sometimes I buy too many books, kidding myself that £3 or £4 is a negligible amount and won’t add up. Other times, I have unexpected expenses like vet bills or replacing broken items. However, I always go back to reducing my debt instead of increasing it. It’s not easy, but it will be worth it in the end.

Facing your money problems is difficult at the best of times, let alone when you are recovering from mental illness, but it’s easier to do it now than to wait until the problems get worse. You are not alone. There are people who can – and will – help you. Start by following the links I have provided above.

 

See also: 7 Steps to Start Dealing with Debt