by Simon Wright

Created on: March 16, 2007   Last Updated: July 09, 2009

Many people suffer from money problems at some time in their life, and being in that position can feel soul destroying and very lonely. It's important to remember, then, that you are not alone and that many people who have suffered from money problems have turned their finances around. You can too and here are some proactive steps that you can take to start to make a difference.

Step 1: Identify your exact financial position:

Acknowledging that you have a problem and quantifying the exact scale of it are vital if you are going to be able to tackle the monetary challenge that you face. There can be a temptation, however, for some people to shy away from the facts and figures. Credit card bills and bank statements get stuffed into a drawer unopened, because the thought of having to look at all those figures creates panic.

Take a deep breath and check out your bank statement and look at your credit card balance. Write down how much income you have coming into your bank account and how much your regular monthly outgoings come to. This will help you to understand your current financial position, even if it makes for depressing reading.

Step 2: Create a budget and reduce your costs:

Most of us can trim costs from our monthly expenditure. This will be especially the case for people who have a tendency to be extravagent in their spending. Go through your regular costs and group them into categories. For example, you might have headings such as credit card payments, loan payments, utility bills, groceries, entertainment, etc.

Having identified what you are spending money on, work out where you can trim or cut out costs. Create targets for your spending and build these into a budget document. Budgets should be a living document, which means that you will go back each month to see how you are doing and to adjust your targets, as necessary.

Step 3: Consider debt consolidation:

Bad debt is typically made up of credit card payments, loan payments, and overdraft interest and charges. If your debt is made up of a combination these debt types, then there may be value in speaking to your bank about consolidating all the debt into one loan account. Loans typically have a lower rate of interest than credit cards or unauthorised overdrafts, so this may help reduce the burden of those monthly payments.

Step 4: Move from an unauthorised overdraft to an authorised overdraft:

In theory, you should be aiming to keep your bank balance positive at all times. However, there

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