Stuck in the Red: What to Do When Your Debt Gets Too Much

Two people holding a pink piggy bank

From unforeseen emergencies to unemployment, racking up debt is easy to do – but accumulating too much can lead to other financial issues such as not being able to save money, missing bill payments and having to borrow more money to stay afloat. So, if you don’t know how much money you owe, your bills are often late or your finances are causing you to lose sleep, it’s likely you have more debt than you can handle – that’s why we’re here to help.

Today, we’re going to address how to manage debt when it all gets too much, helping you feel in control of your finances and helping you on your way to rebuilding your credit. No debt problems are unsolvable – although it might not be simple, the earlier you address these problems, the easier it is to tackle them.

Get free debt advice

Getting help with debt is the first step to finding out how to effectively manage debt. From online to telephone and face-to-face advice services, there is a free platform for everyone to confide in.

Finding ways to manage debts is always possible, even if you think you have no money. A debt adviser, for example, will never judge you or make you feel bad about your situation, and will always be happy to talk to you, no matter how big or small your problem may be. Furthermore, a debt adviser is likely to suggest ways to deal with your debts that you might not know about – so speaking to one will make you feel less stressed and anxious and more in control of your life again.

Keep a budget

By keeping a budget, you’ll know exactly how much money you have coming in and how those funds are being spent. This is an important step in managing debt and building a successful financial future, as you’ll be able to get the most out of your money. A budget will give you a sense of control over your funds and is beneficial regardless of your economic standing.
From a notebook and pen to using a spreadsheet or financial software, analysing your spending can be tailored in whichever way you see fit.

Setting immediate goals to focus on today and long range goals which could span from weeks to decades means you can prioritise your financial goals accordingly. After determining your aims, calculate your income and expenses to obtain a clearer picture of how to achieve them. Then, it’s all about making sure you’re on track. Your expenses should never exceed your income, and if they do, adjustments need to be made accordingly.

Pay your bills on time each month

Late payments will make it harder to pay off your debt, as late fees will quickly add up. If you miss two payments in a row, your interest rate and finance charges will increase – subsequently, paying your bills on time is an effective way to stop the debt increasing.

Setting alerts and reminders on your smartphone a few days before your payment is due is a great way to stay ahead. Alternatively, create a monthly bill payment calendar to help you figure out which bills to pay with which paycheck.

If you miss a payment, don’t wait until the next due date to send it, as it could have already been reported to a credit bureau. Making the minimum payment will keep your debt from growing and keep your account in good standing, so ensure you prioritise these payments every month.

Check your options

Deciding on a debt solution is dependent on the type of debts you have, the amount of debt you have and how much money you can pay towards them. You could arrange a debt management plan by talking to your creditors.

Alternatively, consider taking out a debt consolidation loan to create a more manageable situation. The most obvious benefit is making one single payment, combining it into one monthly deadline. Debt consolidation loans also often come with low interest rates which prevents constant additional fees accumulating. By paying off debt payments efficiently, you’ll be in a position to achieve financial stability sooner – as getting your debt under control will mean you can start working on rebuilding your credit score, putting yourself in a better financial position by managing your debt.

Ultimately, a debt consolidation loan will reduce stress by focusing one payment in a manageable way, giving you extended time to pay the loan back so you can regain control over your finances.

For more tips on managing debt, budgeting and exploring your options, head over to the Jolly Good Loans blog to find out more.

New Year, New Rules: Changes to Expect This Tax Year

Last month saw the renewal of the UK tax year, and with that comes an array of new rates, thresholds and allowances. That’s why today, we’re here to help by breaking down any changes, both big and small, that might affect your personal and business finances this tax year.

Personal tax

Income tax thresholds have risen, with the amount you can earn per annum before paying income tax now capped at £12,500 (up from £11,850 in 2018). This means most people can look forward to a minor reduction of £130 in tax across the year, while high-earners with an annual income of over £50,000 will face the 40% higher rate tax (up from £46,350 in the previous year).

In Scotland, a whole range of changes to personal tax rates were announced following the Scottish Budget announcement back in December 2018. Primarily, this entailed the introduction of new tax bands and subsequent thresholds:

  • Starter rate (19%): £12,500 – £14,549 PA (up from £11,850 – £13,850)
  • Basic rate (20%): £14,550 – £24,944 PA (up from £13,851 – £24,000)
  • Intermediate (21%): £24,945 – £43,430 PA (up from £24,001 – £44,273)
  • Higher rate (41%): £43,431 – £150,000 PA (up from £44,274 – £150,000)
  • Additional rate (46%): Over £150,000 (Same as previous year)

Commercial perks

Benefits in kind (BIK) tax rates have increased as of 6th April, with taxable rates on company cars now being based on the levels of CO2 emissions emitted from the vehicle. HMRC has released this handy guide to help you work out what tax threshold your company vehicle falls under.

Elsewhere, taxation fees now apply to any personal fuel allowances on company vans at an increased rate as of April, with BIK on fuel for a van with personal use allowance rising to £3,430 (up from £3,350 in the previous tax year).

Student loans

The new tax year brings good news for students, with The Department for Education confirming a rise in the repayment thresholds for all student loans:

  • Plan 1 loan repayments will now commence once the loanee is earning £18,935 PA (up from £18,330)
  • Plan 2 loan repayments will commence following a salary of £25,725 PA (up from £25,000 the previous year)

Workplace & personal pensions

The tax-free total you can pay into a personal pension remains at £40,000 each tax year, although the lifetime allowance for pension savings has now increased to £1,055,000 (up from £1,030,000).

In auto-enrolment workplace pension schemes, the minimum pay-in amount required has also increased. As of April, employer and employee contributions must be at least 8% of the employee’s qualifying salary.

Corporation tax

Corporation tax (the payable rates on a business’s total profits) remains at 19% this year, however the UK government has announced plans to reduce this to 17% for the following 2020/21 tax year.

This comprehensive guide to financial changes this UK tax year will ensure you can stay on top of your outgoings and taxes, enabling you to sufficiently budget for all aspects of the year ahead. For additional budgeting tips and tricks, why not check out the rest of our blog?