Taking on debt is often unavoidable for most families – whether it’s a mortgage, car loans or credit cards. However, uncontrolled debt can quickly spiral and become a major source of stress. Implementing some practical strategies as a family can help manage loans effectively and maintain healthy finances.
Discuss Your Finances Openly
The first step is to openly discuss your family’s financial situation. Sit down together and review total debts, interest rates and monthly repayments. See how your outgoings stack up compared to your income, such as a salary, fostering allowance, pension, etc. Understanding the full picture allows you to create a coordinated debt payment plan.
Set a family budget that accounts for loan repayments along with other expenses like utilities and groceries. Tracking all outgoings helps identify where cutbacks may be possible. Being transparent about finances also reduces anxiety caused by avoiding the topic.
Prioritise High Interest Debts
Some strategic repayment can minimise interest charges. List all debts by interest rate, paying the minimum on all loans except the most expensive. Put any extra funds towards the highest rate debt first. Once that’s cleared, focus on the next highest and so on. This “debt avalanche” method saves money long-term.
Consolidate Loans
If repayment is a struggle, consolidating multiple debts into one lower interest loan can help – effectively replacing various credit card or store card balances with one lower monthly payment. Be aware of fees involved and check it doesn’t extend the repayment term too much.
A 0% balance transfer card enabling fee-free shifting of other credit card balances can provide temporary relief. Choose a suitable card length to clear debts before the 0% period ends.
Boost Your Income
Growing household income makes debt repayment easier. Consider taking on extra work – freelancing, temporary jobs or simply more hours. Explore any benefits or tax credits your family is eligible for.
Even small lifestyle changes like eating out less or renegotiating insurance policies frees up extra cashflow to tackle debt. Old possessions sold online also generate quick funds.
Avoid Acquiring More Debt
It can be tempting to rely on credit when managing existing debts. However, being disciplined about only essential borrowing prevents the situation becoming unmanageable.
Think carefully before acquiring any new loans or credit cards. Ask yourself if purchases can wait until they can be affordably funded without borrowing. A new car might be essential, but a foreign holiday probably isn’t.
Communicate with Lenders
If meeting repayments is impossible due to unexpected circumstances like job loss or illness, promptly contacting lenders is essential. Explain the situation and request assistance – reduced or deferred payments for a time. Most want to help preserve the relationship.
Ignoring letters and calls from lenders exacerbates stress. Stay proactive in arranging alternative plans. Be honest about what is viable based on your new circumstances.
Staying on top of finances as a family takes commitment but reduces money worries weighing on everyone’s minds. Keep talking, take advantage of income options and carefully manage new credit. Most importantly, support each other through the challenging times.
