Managing Debt
There are several ways in which to manage debt but the most fundamental one of these is to examine your income and your expenditure.
As Wilkins Micawber said in Charles Dickens’ David Copperfield, “Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery”.
The character Wilkins Micawber was modelled on Charles Dickens father John. John Dickens got himself into substantial debt and ended up in the Kings Bench Prison as did the character Micawber. This was a prison for debtors in South London. Fortunately they stopped sending debtors to prison in 1864 and, in the novel, Wilkins Micawber eventually made a fresh start in Australia.
Fortunately nowadays people are not sent to prison for being in debt and fleeing to Australia to escape one’s creditors is not a recommended strategy, but if your expenditure exceeds your income, then it is necessary to take serious stock of your situation.
When managing debt, the first thing you need to do is to see if you can bring your income and expenditure into better balance. Can you increase you income for instance by taking on more work or finding a better paid job? Are there any items of expenditure on which you can cut down by forgoing a few luxuries or shopping at cheaper shops? The best way to tackle this is to keep a careful record of everything you spend for a period of time, say a month, and examine it to find out where your money is leaking away.
If this does not provide a complete solution, then there are other options for managing debt. Examples of these are debt consolidation, setting up a debt management plan, or looking into the possibilities of insolvency through an IVA or bankruptcy, though the last one of these should be avoided if possible. Even if there is no option apart from bankruptcy, life will still go on and within a year you should be out of debt; at least you won’t be put in prison.