It is easy to become over-committed. Every time you sign up for a new service (such as cable TV or a mobile phone contract), buy something on hire purchase or add to a credit card debt, you increase your monthly commitments.
Before you sign up for a new service or a new credit commitment, make sure you can afford the payments. Create a budget sheet and keep it up-to-date, thinking about how you would make the payments if your income dropped.
Changes in circumstance
Another reason for over-commitment may be a change in personal circumstances that leads to a drop in income - for example, if you:
- lost your job
- became ill or had an accident that meant you had to stop work
- separated from your partner
Any of these events could cause a drop in income and mean that you have to change your spending priorities. If something unexpected does happen, it's important to review your budget as soon as you can.
You should also check if you can increase your income through benefits or tax credits.
A personal budget can help you to plan ahead and make the most of your money. You'll need to:
- identify your commitments - for example, mortgage, rent, bills
- work out how much they cost
- work out where the money comes from to pay for them
- look at ways of reducing your spending - for example, you may be able to get better deals on your gas and electricity and your insurance
- spread the cost by paying bills by Direct Debit - there are usually easy payment schemes for most regular bills such as TV Licence
- stop paying for items that are no longer necessary
It's important to review your budget regularly, because your circumstances are likely to change.
Priorities and plans
By working out a budget you'll know how much money you have for essential living expenses (such as household bills, rent or mortgage and food) and how much you can afford to commit to other plans (such as buying a car, taking out a mortgage, going on holiday or saving for the future).
By prioritising your commitments you can make sure your basic needs are met and then you can decide what else you can afford, and what you may have to save for or do without.
Get the most from your money
By shopping around and negotiating - not just for goods and services but also for financial products such as loans and credit cards - you can make your money go further.
What to do if you're over-committed
If you are over-committed and have a debt problem, don't ignore the situation.
Signs you may have a problem include:
- having rent or mortgage arrears
- taking out new loans to pay off old ones
- only paying the minimum amount on your credit card
- going over your agreed overdraft limit at the bank
- using a credit card for day-to-day purchases
- ignoring letters from creditors
By listing and prioritising your debts, budgeting and talking to your creditors you can get the situation in hand.
Where to get help and advice
Several agencies offer free help and advice including:
- Citizens Advice Northern Ireland
- Step Change Debt Charity
- Debt Management
- Advice NI
- Money Advice Service