New Year's Resolution to avoid debWe’re on the eve of 2013, and now is the time when many Brits make resolutions in the face of the coming year – here’s how to keep one to avoid bad debt.

Just as many other individuals working and living in the UK have had a rather horrid 2012 when it comes to their financial stability, you may have felt the squeeze caused by rising living costs coupled with pay freezes or job losses. You may have even run into some trouble with your creditors, especially if you’ve fallen prey to high interest rate short term loans provided by payday advance lenders, but you can take the New Year as an excellent opportunity to turn over a new financial leaf and make some changes that will see you more able to stretch your money farther – and avoid bad debts in the future.

not all debt is bad

An important distinction must be made before going forward: not all forms of debt are automatically terrible – in fact, even a payday loan may be a good idea in certain situations. However, the key to whether or not your debt is good or bad is whether it’s sustainable or not.

Unless you have enough  money left over after all your bills – your rent or mortgage, your utilities, the cost of food and so forth – to make a repayment towards whatever debt you have, your debt, unfortunately,  will not be sustainable. This means you need to either do one of two things: increase the amount of money you have left over to put towards your bills, or reduce your debt liabilities until you can afford to make regular repayments.

it’s not magic

It may sound easier said than done, but it’s not impossible to change your financial situation even in the currently rocky economic landscape. Yes, you don’t have much control over whether you’re made redundant or if your employer starts handing out pay cuts, but you can change the amount of money you spend on outgoings, which will leave more money left over to take up the shortfall caused by a reduction in your income – whether this means eliminating luxuries from your lifestyle or selling your car and taking public transport instead, you’ve got to do what you have to in order to meet ends.

You can also, believe it or not, negotiate with your creditors to reduce your debt burden as well, because if the choice is to continue receiving money from a borrower or end up having to spend time and money on collecting on a debt that has ceased to be repaid, the majority of creditors will opt for a revised repayment schedule. It’s better to receive some money from a borrower compared to none at all from the lender’s point of view, and while it will take you longer to clear a debt if your repayments are smaller, you will gain the ability to afford to do so and still live your life.

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