So lately I've been researching one of the world's more scary financial terms - debt consolidation - for a few reasons. Some of my female friends feel intimidated or afraid of their finances. They refuse to open bank statements and think they can just bury their heads in the sand and it'll all be OK. Sadly they can't and it won't - one of my friends got in a lot of trouble doing just that. I was looking, however, not for academic reasons to understand why some women fear finance, but for research.
Mainly I have a friend who was frustrated by never feeling like she had ever been in control of her money. She has suffered financially and things were a bit of a mess all over the place. She was a 'head in the sand' person but had decided to change. It was time, she felt, for a big 'spring clean' on her whole life (relationship, flat, finances). She has a lot of loans all over the place - her computer equiptment, her credit cards, etc. - and some are very high interest. She's paying the minimum monthly - but only the minimum - and since Christmas she has been wondering if that's wrong. What I found out was downright frightening and really made her seriously reassess how she handled things and to consolidate her loans. She also had a flat full of stuff and she was single. Previously she felt utterly overwhelmed by everything but finally decided to tackle things step by step.
So what is debt consolidation if it isn't some scary technical thing you're forced into? Well, if we break the words up and think about it, the phrase would seem to imply that you bring together a lot of different loans or similar indebtedness in to a single place. This is a way to put all your loans together and just make one repayment which, in her case, could mean thousands in savings. I'm not exaggerating but your calculations may vary.
Now, my friend has been trying to reorganise her life for a while but never quite managed it before now. After losing both her parents within 8 months of each other before she'd even hit 40, she inherited a headache (thanks to her sister) and a lot of furniture. She was not willing to let go of the furniture and so in her already cramped 2 bedroom downstairs flat she had squished in just about everything you could think of and was literally living on the couch. Her flat was cluttered, her finances were cluttered and she had stuff all over the place. She decided one day to just take control of everything - her flat, her finances and her life.
She was single and wanted a man (her choice). She was crowded out of her extremely messy flat and she wanted to clean up. She had lots of little debts and she wanted to get debt-free before the end of the year. The first thing she tackled was her flat. Now, this wasn't just about cleaning, it was about managing her debt so she sold a lot of DVDs and cleaned up the rest into just a core of 3 columns of floor to ceiling boxes - the rest got sold. She also sold a lot of old tech and books plus went to boot sales to get rid of even more stuff she no longer used like games, clothes, shoes, bags, etc. She had boxes for charity as well but focused on using her clutter to help pay off her debts.
Next step, finances. First she cut up all her cards and went to working only with cash. This meant she knew exactly what she was spending and could more easily stick to a budget and control her spending. Next, she did a kind of audit on everything she owed and the interest rates. Of course, she was paying high rates of interest on her credit cards but some loans were repayment only with no interest. I found that by paying off the minimum, even with cutting her cards up, it'd take over a decade to pay them off *and* she'd pay double the debt back. According to the calculator I used my friend could save over £2,000 after cutting her cards and paying everything off with a single loan rather than what she was doing. Your mileage may vary but I calculated this by putting her total interest-bearing debts together and an average of her interest rates and used the calculator on the debt consolidation page on the UK's leading peer to peer lending site.
She's still looking for a man :-) She's very nice gentlemen and a great catch ;-)
While her journey continues, she is in a much better place than she was in her flat and in her finances - but it took work. It can seem really daunting at first, as well as scary, but if you break it down into steps you may find that not only do you spring clean your environment, you can make a bit of money in the short term while saving money on interest in the long term. Donate clothes and stuff you can't sell online or at a boot sale to charity, or recycle. Be brave and audit your finances critically or pass everything to a friend for help. Take control piece by piece and by breaking it into steps rather than tackling it all at once, you'll be successful.
These images step through ways of taking control of your finances which I used when I was researching this. This won't work for everyone (clearly) and really, paying your full balance off every month is the right way to go. There are also free financial advice services out there so you don't have to feel pressured into doing anything. Just don't pretend financial matters will just go away. I have also been guilty of this but no longer - I'm reformed ;-) Take control with just a simple audit - start there and the rest will fall easily in to place. Your flat and your relationship are still up to you ;-) But if she can do it, you can too!